Kuwait-based Gulf Investment Corporation (GIC) has raised 750 million ringgit ($255 million) by selling five-year Islamic bonds at 4.90 percent, a source with direct knowledge of the deal said on Tuesday.

The sukuk, which is part of a 3.5 billion ringgit funding programme set up earlier, will be issued on Wednesday to about a dozen investors, said the source who declined to be identified as the deal has not been announced.

The Islamic bond sale was arranged by Malaysia's AmBank  and structured according to the concept of wakala bi istithmar, the source said.

Under this structure, GIC will be appointed as agent to collect and manage the sukuk proceeds for the bondholders. GIC then appoints itself to manage the sukuk assets and will invest the net proceeds through a commodity murabaha financing arrangement and a sub-wakala investment facility. Proceeds will be channelled into sharia-compliant ventures.      

GIC was not immediately available for comment.

In February, GIC had sold 600 million ringgit of five-year Islamic bonds in Malaysia at a yield of 5.25 percent.     Malaysia's benchmark five-year government bond  last fetched a yield of 3.455 percent.

GIC was created to drive private enterprise and economic growth in the Gulf region. Its investments include companies such as The National Titanium Dioxide Co, Gulf Industrial Investment, Al Dur Power & Water Co and Bahrain Industrial Pharmaceutical Co.

It was set up in 1983 by the Gulf Cooperation Council and is owned by the six member states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE.

GIC had previously issued 1 billion ringgit of bonds in Malaysia in 2008. Other Middle East issuers including Bahrain's Gulf International Bank, Dubai's government and Abu Dhabi's transport department are also contemplating Malaysian sukuk issuances. - Reuters