Fixed Income

Sukuk Issuance Fell Dramatically In 2008 But Long-Term Market Prospects Are Good, Says S&P

Press Release

PARIS, January 14, 2009--Despite a dramatic decline in volumes in 2008, the long-term perspectives for global sukuk issuance are still good, said Standard & Poor's Ratings Services in a report published today "Sukuk Market Declined Sharply In 2008, But Long-Term Prospects Remain Strong."

"The decline in sukuk issuance in 2008 was as a result of global market turmoil, drying up of liquidity, widening of credit spreads, and investors' wait-and-see attitude," said Standard & Poor's credit analyst Mohamed Damak. "Although difficult to measure, part of this decline could also have been due to comments about the Sharia compliance of some sukuk by the Accounting and Auditing Organization for Islamic Financial Institutions.

More than 45% of sukuk issued in 2008 were "ijara" (lease financing), most probably as a direct consequence of the debate about Sharia compliance among some scholars. The value of sukuk issued in 2008 dropped by more than 56% compared with 2007, to $14.9 billion. "We do not expect the market to start reviving before the second half of 2009 or early 2010," added Mr. Damak.

Indonesia to issue retail sukuk in February

Reuters reported on 7 January that Indonesia's finance ministry plans to issue Sukuk for retail investors in February to help finance the state budget said Rahmat Waluyanto, treasury director general at the finance ministry. The yield shall be announced on 5 February and be offered till 20 February, listing on the bourse follows on 26 February.

Reuters: Turkey's main investors eye possible Sukuk

Cecilia Valente and Selcuk Gokoluk reported on 7 January on Reuters that the Sukuk planned by the Turkish government, finds potential buyers in Turkey's institutional investors like Oyak Emeklilik or AK Portfolio. On average, Turkish pension schemes allocate more than 70 percent of their assets to government bonds, with the rest in shares, repo or bank deposits.

Kuwait plans Sukuk to help ailing firms

Gulf Daily News reported on 7 January that Kuwait may issues Sukuk or Murabaha facilities using qualified investment firm's assets as collateral. Citing another daily Al Rai, saying the government had finalised plans for a bill to do so, but may need parliament's approval. Several of the investment firms have said they need fresh funds and have difficulties raising them. Global Investment House and Investment Dar both are said as seeking finance up to USD 1 bn. Further the daily newspaper Al Qabas wrote that Global is still waiting response from foreign financers on a 3-month moratorium to repay elder loans.

Brunei sells 148 mn in local currency short term Sukuk

Reuters reported on 6th January that Brunei has sold Brunei Dollar 148 million (USD 100.7 mn) of short-term Sukuk, it sold the bonds in four different issuances, with maturity periods ranging from 91 days to 364 days.
This brings total government issuance to Brunei Dollar 1.3 bn to date. Brunei government has been issuing Islamic debt since April 2006.

Indonesia to issue global bonds in 2009

Reuters reported on 31 December that Indonesia plans to issue international bonds, and Sukuk. Timing is not scheduled yet. Treasury Director General Rahmat Waluyanto was quoted.

More background: http://in.reuters.com/article/asiaCompanyAndMarkets/idINJAK38567320081231

Nakheel Sukuk yields 32 %

Dubai`s corporate bonds pricing in further economic difficulties according to Nish Popa, ING Investment Management. The yield on the 3-year Sukuk issued by Nakheel Development, soared to 32% from 5% in January 2008.

Saudi Hollandi Bank SAR 775 mn Tier 2 Sukuk

Arab News reported on 31 December that Saudi Hollandi Bank closed its SAR 775 mn first tranche of a SAR 1.5 bn Tier-II Sukuk issuance approved by the bank`s shareholders. The 10-year floating rate note is 2 % above SIBOR (Saudi Interbank Offered Rate) and can be called at the end of 5 years. According to the Chairman Mubarak Al-Khafrah Saudi Hollandi is the first to support its capital in this way. Saudi Hollandi Capital acted as sole lead manager & book runner for this transaction.

Geoff Calvert is the managing director.

Reuters: Japan investors interested in Islamic products

Reuters reported on 30 December that Japanese investors have expressed interest in developing Islamic capital market products, according to a local newspaper quoting Aseambankers Chief Executive Officer Mohammed Rashdan Mohammed Yusof. No company names were disclosed in the interview, however Aseambankers, the investment bankers of Maybank Group plans to develop the Sukuk market in Japan.

Sukuk Trends

Mohammed Abbas and John Irish, reported on Gulf News (Reuters) on 9 March about the Sukuk market tendencies driven by sellers issuing in local currencies at low rates. The fallen LIBOR rates due to Federal Reserve policy are above off-setting for the increased margins asked for credit clients.

Local currencies are in favour as long as speculation is around about reevaluation of the dollar peg - this also limits the foreign demand for Sukuk and exposure to Gulf credit markets. Local currency Sukuk are relying on the GCC internal demand for such paper.

Source: http://archive.gulfnews.com/business/money/10212004.html

Banks appointed for Pakistani Sukuk

The Guardian reported on 25 April that Pakistan appointed advisers for first domestic Sukuk, being Dubai Islamic Bank and Standard Chartered Bank Pakistan as Managers. The estimated size of the Sukuk might be 20 bn Pakistani rupees.

Ashfaque Hasan Khan is special secretary at the Finance Ministry.

Source: http://www.guardian.co.uk/feedarticle?id=7484821

Tamweel successfully closes USD 235 mn syndicated bank facility

Tamweel PJSC, a Dubai-based real estate financer has closed a 3-year USD 235 mn syndicated bank facility.

ABN AMRO and Noor Islamic Bank served as lead arrangers and joint bookrunners for the transaction, which has been priced in both US dollars and UAE dirhams, and will reach maturity in three years.

Wasim Saifi is Chief Executive Officer of Tamweel.
Gaurav Agarwal is Chief Financial and Support Services Officer, Tamweel.
Hussain Al Qemzi is Chief Executive Officer of Noor Islamic Bank.
Vishnu Deuskar is Head of Global Markets ABN AMRO UAE.

Source: http://www.albawaba.com/en/countries/UAE/226249

Nakheel sets USD 1 bn Sukuk price guidance

Mohammed Abbas reported on Arabian Business on 27 April that state-owned Nakheel, developer of three palm-tree shaped islands off Dubai's coast, set price guidance for the 2-year USD 1 bn Sukuk Al Ijara at 225 to 250 basis points above the Emirates Interbank Offered Rate (Eibor). The Sukuk will be denominated in Dirham. 3-month Eibor is at about 1.92 %, according to data from newswire Reuters. Date for sale is not yet set.

Dubai Islamic Bank, JPMorgan Chase & Company and Dubai-based Emirates NBD are Arrangers.

Kar Tung Quek is Nakheel Chief Financial Officer (CFO).

Source: http://www.arabianbusiness.com/517621-nakheel-sets-1bn-bond-price-guiden...

Syndication markets still suffering

Christopher Mangham reported on Arabian Business 19 April that Syndication markets for Mideast borrowers are increasingly difficult to price with higher margins coming up, while also country limits are often reached. The market remains, however, active with USD 37 bn in Mideast awaiting launch or are under syndication. It becomes more common that bank committments are held flexible in pricing and margins supposed to be increased.

Corporate lending in the Gulf, which did not exist in 2001-2002, totalled USD 67 bn in 2007.

Source: http://www.arabianbusiness.com/516908-loan-market-drying-up

Al Jaber Group closes USD 400 mn dual-currency Ijara financing facility

Gulf News reported on 19 April about the USD 400 mn, 5-year dual currency syndicated Ijara facility for the UAE-based Al Jaber Group.

BNP Paribas, Dubai Islamic Bank (through its investment banking arm, Millennium Capital Limited) First Gulf Bank, and National Bank of Abu Dhabi served as the underwriters and bookrunners for the transaction, which has been priced in both US dollar and UAE dirham. The syndicate comprised 7 banks.

Obeid Al Jaber is the Chairman of Al Jaber Group.

Source: http://archive.gulfnews.com/business/Banking_and_Finance/10206883.html

Moody's comments on Islamic finance

Forbes reported on 15 April about the Moody's study regarding Islamic finance claiming the industry grows at double rate compared to the conventional markets and becomes more international but also remains diverse and heterogene. Interpretation of rules and regulation vary widely, and they perceive a lack of technical and contractual standardisation.

Moody's expects the Sukuk market to become more complex, more structured, larger, more diversified and more liquid as it evolves over time.

Source: http://www.forbes.com/markets/feeds/afx/2008/04/15/afx4891802.html

Kuwaiti Abyaar to launch USD 1 bn Sukuk before year-end

Parag Deulgaonkar reported 22 April in Business 24/7 that Kuwait-based Abyaar Real Estate Development is to launch a USD 1 bnsukuk issue before year-end to finance its projects and will dual list its share on the Dubai Financial Market, for which it has appointed NBD Investment Bank as financial advisor and placement agent.

Marzooq Al Rashdan is Vice-Chairman and Managing Director of Abyaar

Source: http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=...

Villamar Sukuk Prices USD 190 mn 2013 Sukuk FRN At Par,Libor +2.75

Dow Jones Newswire reported on 18 April, that Villamar Sukuk Company Limited has priced USD 190 mn of 2013-dated, sukuk floating-rate-notes through Merrill Lynch and Al Rajhi Banking & Invesment Corporation. It is going to be listed at the DIFX.

Source: http://www.zawya.com/Story.cfm/sidDN20080418003227

Philippine Government plans USD Sukuk

Eileen A. Mencias reported in Manila Standard Today on 15 April that the Philippine Government plans a USD 900 - 1000 mn 5-year sukuk through Al-Amanah Islamic Bank to provide a long-term financing package for the acquisition of the Metro Rail Transit-3 project along Edsa to replace bridge finance by the Development Bank Philippines (DBP). First Metro is teaming up with the DBP to arrange the Sukuk bonds. DBP is in the process of taking over control of Al-Amanah Islamic Bank. CIMB and Islamic Development Bank are supposed to assist in structuring.

Juanchito Dispo is executive vice president of First Metro Investment Corp.

Source: http://www.manilastandardtoday.com/?page=business2_april15_2008

Sukuk from Hong Kong?

Deal Journal reported on 10 April about potential ambitions of Hong Kong based corporations to issue Sukuk. Those companies cited include the Airport Authority Hong Kong, which is wholly government-owned. The Chinese newspaper Mingpao is cited that the other firms are rail operator MTR Corp. and Hong Kong Mortgage Corp.

MTR denied it is planning an Islamic bond issue.

Source: http://blogs.wsj.com/deals/2008/04/10/hong-kong-considers-islamic-bonds/

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