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Indonesia's finance minister Sri Mulyani Indrawati announced the government plans to issue a global sukuk this week. Indrawati did not give further details on the planned issuance. An official has previously said the government will issue global sukuk in the first half of 2017. According to Thomson Reuters, Indonesia has given initial yield guidance of 3.75% for a five-year tranche of the U.S.-dollar sukuk and 4.5% for 10-year tranche.
Shareholders of Kuwait Finance House (KFH) have approved issue of sukuk and other sharia-compliant financial instruments.
The Central Bank of Jordan (CBJ) the second sukuk issuance on behalf of the National Electric Power Company (NEPCO) at a total value of JD75 million, 4.1% returns and a five-year maturity period. The bank reported that demand on the sukuk was 2.73 times the value of the issue, having received orders for JD205 million-worth bonds. The CBJ said the high turnout underlines the increasing demand on the financing tools compatible with the Islamic Law, which have been lacking in the local market during past decades. The bank said the success of this issuance was a result of the continuous coordination of the Finance Ministry, the CBJ, NEPCO, the Jordan Securities Commission and the Central Sharia Oversight Commission.
UEM Edgenta will issue Islamic commercial papers (ICP programme) and Islamic medium-term notes (IMTN) with a combined aggregate up to RM1bil in nominal value and a sub-limit of RM300mil.
UEM Edgenta said the proceeds raised from the sukuk programmes would be utilised for its syariah-compliant general corporate purposes. The ICP programme has been assigned a preliminary rating of MARC-1/S and the IMTN programme has been assigned a preliminary rating of AA-IS by Malaysian Rating Corp. The company added that it had lodged the required information and relevant documents relating to the proposed sukuk programmes to the Securities Commission.
Saudi Arabia hired Citigroup, JPMorgan Chase and HSBC as global coordinators on its international Islamic bond sale. The kingdom also picked Deutsche Bank and BNP Paribas among others as lead managers for the sale. The sukuk could come as soon as this month. Saudi secretary-general of the Finance Committee, Mohammad Al Tuwaijri, announced in December the kingdom's plans to raise between $10 billion and $15 billion from international bond markets in 2017 and sell about 70 billion riyals locally. The world’s biggest oil exporter is considering international and domestic debt issues to help finance its budget deficit.
Towards the end of this month Bank Muscat is expected to raise OMR23-30 million, which is the first tranche of Meethaq’s OMR100 million-sukuk programme. Meethaq is Bank Muscat’s pioneer Islamic banking window in Oman. The bank has already received an initial approval from stock market regulator Capital Market Authority (CMA). Bank Muscat's Deputy CEO Sulaiman Al Harthy said the sukuk programme starts with a small amount, maybe OMR25-30 million to test the market and see the market appetite. Al Harthy also noted that this year, Islamic financial institutions are expected to grow at a similar rate as seen last year. Meethaq Islamic financing receivables rose to OMR855 million by end-December 2016, compared to OMR635 million in the same period in 2015.
The United Arab Emirates' Sharjah Islamic Bank (SIB) plans to issue convertible sukuk equivalent to 10% of the lender's capital. Funds raised through the debt sale will be used by Islamic endowments selected by the government of the emirate of Sharjah. The bank also authorised a capital increase to 2.67 billion dirhams ($726 million) from 2.43 billion dirhams.
Oman’s Capital Market Authority (CMA) has given provisional approval for two new sukuk issuances of an aggregate size of RO 300 million (around $780 million). CMA President Abdullah bin Salim al Salmi said the proposed issuances underscore the potential and appetite for sharia-compliant finance and investment in the Sultanate. He noted that as of end-June 2016, the value of the sharia-compliant capital market jumped to RO 3.91 billion ($10.16 billion), comprising sharia-compliant shares, investments and sukuk, versus RO 3.24 billion ($8.42 billion) a year earlier, representing an increase of 21.14%. Significant growth has also been witnessed in the Takaful market with premiums reaching RO 41.99 million as of end-2016, up from RO 38.77 million a year earlier, representing an increase of 9.2%.
Abu Dhabi Islamic Bank (ADIB) has issued a statement clarifying that the story issued by Reuters about a US dollar Sukuk issuance in the next few months is incorrect. Reuters had recently reported that ADIB is planning to make a US dollar-denominated Sukuk issue in May this year. ADIB said that it has no immediate plans to issue any Sukuk and this has been clarified in an official statement to Reuters.
Abu Dhabi Islamic Bank (ADIB) is considering to make a U.S. dollar-denominated sukuk issue over the next few months. The Islamic lender would join a number of Gulf Cooperation Council banks raising debt internationally through both Islamic and conventional bonds to improve their liquidity. Bahrain-based Gulf International Bank was the first regional lender to raise debt internationally this year with a $500 million bond sale in January. It was followed by a $1 billion sukuk sale by Dubai Islamic Bank, a $500 million conventional bond by Ahli Bank Qatar and a $500 million bond by the United Arab Emirates’ Bank of Sharjah.
It’s only a matter of time before the first green sukuk comes to market. Speakers at a White & Case event last week explained that there’s nothing stopping issuers from drafting a shariah-compliant sukuk save for a lack of top-down support. In 2016, the climate-aligned bond market grew by 16% to $694 billion, $118 billion worth of which are labelled green. The global sukuk market, which has slowed in recent years, saw $40.3 billion worth of deals issued in the same timeframe. Climate-aligned finance is a fast-growing market that’s open to innovation. Sheikh Bilal Khan, co-chairman at Dome Advisory said green issues are not as spoken about in the Islamic finance industry as they should be. There’s nothing in the Qu’ran forbidding them, in fact it stresses our responsibility to the environment.
Kuwait's Warba Bank announced the launch of a marketing campaign for sukuk to be issued with a total value of USD 250 million. Warba Bank's CEO Shaheen Hamad Al-Ghanim said the campaign targets investors in Kuwait and Gulf Cooperation Council (GCC) countries, in addition to global stock markets. Al-Ghanim explained that the bank signed a deal with an international advisor to a new strategy for 2021, which is based on improving the bank's operations and further enhancing the quality of assets and diversifying sources of income. He noted that Warba Bank has previously obtained approvals from the Central Bank of Kuwait and Capital Market Authority, while the General Assembly has authorized the board of directors to issue sukuk.
Africa Finance Corporation (AFC) has carried out a 150 million US dollar Islamic financing transaction on the Murabaha platform of Nasdaq Dubai. Following high levels of investor interest, the initial target of 100 million US dollars was more than twice oversubscribed, resulting in a final order book of approximately 230 million US dollars. Banji Fehintola, Corporate Treasurer of AFC, expressed his gratitude to Nasdaq Dubai whose Murabaha platform greatly facilitated the issuance. AFC’s Sukuk, issued on January 24, 2017, is the highest rated USD Sukuk issuance from an African entity. The privately placed Murabaha Sukuk was awarded an A3 senior unsecured rating by Moody's Investors Service.
In the conventional finance space asset-backed financings have proved a successful method of funding social and civil infrastructure. However, in Islamic finance, asset-backed sukuk have not yet taken off. The majority of sukuk are more dependent on the creditworthiness of the sponsor, rather than the performance of the assets. The concept of securitisation of assets, limited in recourse solely by the performance of the assets underpinning them, has only enjoyed limited application in the Islamic finance space so far. For asset-backed sukuk to succeed, investors have to go beyond simply looking at the credit standing of government and quasi governmental entities and start looking at the actual cash flow and exposure to asset values.
Saudi Arabia has sent a request for proposals (RFP) to banks for a planned U.S. dollar sukuk. The debt sale would be Saudi's second international bond offering, after the sovereign issued a debut $17.5 billion bond in October last year. Saudi Arabia is also expected to issue a conventional bond later this year. The kingdom's bond plans are part of its push towards a more diversified economy that is less reliant on oil exports. The RFP was issued at a busy time in the Gulf with other countries also planning to raise funds internationally to offset the impact of lower global oil prices. Bahrain launched a tap of its $1 billion 2028 bond on Tuesday, while Oman is expected to announce the launch of a new bond this week.
The Assembly General Meeting (AGM) of Qatar Islamic Bank has voted the proposal to increase the limit of the perpetual Sukuk “Additional Tier 1 Capital (AT1) Sukuk“ from QAR 5 Billion to QAR 7.5 Billion. The meeting, held on 21 February, also approved the board of directors’ proposal to distribute 47.5% cash dividends of the nominal value per share, i.e. QAR 4.75 per share.
Dubai Islamic Bank became the first Gulf financial institution to print a sukuk this year as it priced a US$1bn 3.664% five-year issuance. The only other bank from the region to have issued this year is Gulf International Bank, which sold a conventional US$500m five-year last month. Proceeds will go towards refinancing a US$500m sukuk coming due in May, as well as a US$300m maturity for the subsidiary Tamweel. Middle East accounts took 61%, Europe 20%, and Asia 19%. By investor type, banks got 52%, asset managers 39%, agencies 3%, private banks 2% and insurers 2%. Lead arrangers include Bank ABC, DIB, Emirates NBD, HSBC, KFH, Maybank, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered.
According to S&P Global Ratings, the lower liquidity level in the GCC is not the main reason for a drop in the region’s sukuk issuances in recent years. The volume of sukuk was muted last year, particularly compared with conventional bond issuance in GCC countries. S&P believes the complexity of structuring sukuk is the main reason behind muted sukuk issuance in 2016 and it will continue to weigh on volumes in 2017. S&P also estimates GCC sovereigns financing needs at around $275bn over the next three years, the majority of which pertains to Saudi Arabia. While sukuk comprise only a small amount of total outstanding issuance, various governments established the necessary legal frameworks for their issuance.
The first workshop on the Sukuk Model Law was held in Dakar, Senegal. The event was organzied by the Islamic Development Bank (IDB) and the Islamic Research and Training Institute (IRTI), in partnership with the Central Bank of West African States (BCEAO). A number of experts and finance officials from the eight BCEAO member countries participated in the event. The project aimed to create a model Sukuk law and guidelines that leverage global best practices. Subsequent regional consultations are planned for South East Asia, Central Asia and the MENA regions. Speaking on the occasion, IRTI Director Mohamed Azmi Omar said the workshop reaffirmed the importance of Sukuk as an increasingly significant instrument of resource mobilization.