Sukuk

Global #Sukuk Market Outlook: the surge in Sukuk issuance isn't the new normal

The Sukuk market performed strongly in the first half of 2017 as issuance increased by 37.7% in the first six months of the year. This was primarily driven by the jumbo local and foreign currency issuances by some GCC governments. Sovereign issuers turned to Sukuk because wanted to diversify their investor base and to benefit from the good liquidity conditions in local and global financial markets. S&P Global Ratings expects the volume of Sukuk issuance to remain strong in 2017, but this is likely to be the exception rather than a new norm. In their view, the large transactions in the first half of 2017 are unlikely to be repeated in 2018. It remains to be seen if the recent developments in Qatar will impact issuance out of the country. Qatar was placed under sanctions by a group of governments that cut diplomatic ties and trade and transport links.

#Nigeria plans $328mln debut #sukuk sales this month - DMO

Nigeria's Debt Management Office (DMO) announced the sale of its initial $328 million sovereign sukuk in the local market. The proceeds will be used to finance road projects in the country. The bond will be traded on the Nigerian Stock Exchange and also on the FMDQ over the counter platform. The sale will be managed by First Bank and Islamic wealth manager, Lotus Capital, and will aim for retail and institutional investors. Africa’s second largest economy intends to borrow about $10 billion from debt markets to fund a budget deficit aggravated by lower oil prices. It also targets concessionary sources to clear its funding needs and expects to issue N20 billion ($62million) green bond after raising a $1.5 billion Eurobond in the first quarter.

Mideast Debt: Islamic finance industry frets as Dana Gas deems its #sukuk invalid

The decision by Dana Gas to declare $700 million of its sukuk invalid has raised concern about the safety of sharia-compliant debt instruments in general. Dana Gas received advice that its sukuk were not compliant with the Islamic sharia code and had become unlawful in the United Arab Emirates. The firm said it would halt payments and proposed that creditors exchange the sukuk for new Islamic instruments. Dana has struggled to obtain payments from its production assets in Egypt and Iraq's Kurdistan. With a cash balance of just $298 million in March, it had been expected to have difficulty redeeming its sukuk in October. Mohammed Khnifer, a senior associate at the Islamic Development Bank, said this specific sharia compliance risk was unprecedented and this incident had startled the Islamic finance industry.

Oman's $2bn international #sukuk oversubscribed more than three times

Oman's inaugural US2bn international sukuk issuance witnessed a strong investor interest with an orderbook of US6.9bn and over 300 participating accounts. Oman entered the international public sukuk markets via a US2bn seven year sukuk issuance on May 23. The current sukuk follows a US5bn multi-tranche bond priced earlier this year. According to a press release, the final order book represented an oversubscription of nearly three times. The issuance was coordinated by a lead manager group comprising of alizz islamic bank, Citi, Dubai Islamic Bank, Gulf International Bank, JP Morgan, HSBC and Standard Chartered Bank. With this issuance the sultanate has now met significant portion of the funding requirements tied to its anticipated budget deficit for 2017.

#Dubai: #Meraas Holding has #issued $400 million #sukuk –sources

Meraas Holding, a real estate developer in Dubai owned by the UEA government, issued a $400 million sukuk last week. It was sold privately to a select group of investors, according to sources. The Islamic bond has a five-year maturity and is at par with a 5.112 % yield on May the 26th and traded at one to 1.5 points above par shortly after that. Emirates NBD, Noor Bank and Standard Chartered jointly coordinated the transaction and served as bookrunners along with Dubai Islamic Bank, Sharjah Islamic Bank and Warba Bank.
Meraas is the parent company of the leisure and entertainment company DXB Entertainment, which owns 4 theme parks and a water park in UAE capital. It has been said, that a new entity has been set up which will manage billions of dollars of development projects for Meraas Holding and Dubai Holding. Dubai Holding is the investment vehicle of Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum. Raed Kajoor Al Nuaimi, formerly chief executive of DXB Entertainment, has been appointed to lead the new management company.

#Emirates #NBD #launches Emirates NBD Markit iBoxx USD #Sukuk #Index

The new Index will contain 98 Sukuk from 61 issuers that will have a current market value of over $90 billion. The Emirates NBD Markit iBoxx USD Sukuk index captures sovereign, sub-sovereign and corporate Sukuk from emerging and developed markets and will contain investment grade, sub investment grade and unrated securities. They will all offer a broad representation of the global Sukuk universe and provide combining transparency, multi-dimensional analysis, independence and flexibility, it will provide an accurate and objective benchmark for Islamic finance investors.
Developed by Emirates NBD Group in collaboration with IHS Markit, the Emirates NBD Markit iBoxx USD Sukuk Index is a market-cap weighted index dedicated to capturing the performance of the Sukuk market. It will be used for benchmarking, risk and performance analysis and as an underlying for tradable products. In order to meet the growing demand for Shari'ah-compliant solutions, it is envisaged that the Index will be utilised by a range of institutions including asset managers, banks, pensions and sovereign wealth funds and ETF issuers.

#Oman tightens price on $2bn #sukuk amid rush of orders

Oman's $2bn sukuk sale lured orders for more than three times the issue size. The sultanate set final terms on its seven year sukuk at 235 basis points over the mid-swap rate, from initial guidance of about 270 basis points. Landesbank Berlin Investor Lutz Roehmeyer said there was a good demand and now a rush to get an allocation with accepting even less yield. Alizz islamic bank, Citigroup, Dubai Islamic Bank, Gulf International Bank, HSBC Holdings, JPMorgan Chase and Standard Chartered are managing the deal. The country's last foray into international debt markets was a $5bn three part offering of dollar bonds in March.

#Oman starts marketing seven-year US dollar #sukuk

The Sultanate of Oman has started marketing a seven-year US dollar benchmark-sized sukuk offering at 270bp area over mid-swaps. Books are open for pricing via Alizz Islamic Bank, Citigroup, Dubai Islamic Bank, Gulf International Bank, HSBC, JP Morgan and Standard Chartered. The sovereign had signalled the possibility of an additional 12-year sukuk in its mandate. Expected issue ratings are Baa1 by Moody's and BBB by Fitch.

Sime’s #sukuk plan gets okay, crucial step to carve 3 listed companies

#Malaysian holding company Sime Darby has received approval from its bondholders to restructure US$800mil (RM3.46bil) worth of sukuk. Holders of the sukuk approved the company’s plan to buy back the papers or replace the borrower to Sime Darby Plantation from Sime Darby. The broader reorganisation of the group involves the proposed listing of Sime Darby Plantation and Sime Darby Property through share distributions. Sime Darby will remain listed, owning the automotive, industrial equipment and logistics businesses. The holding company plans to create three standalone businesses: plantation, property and trading, and logistics. Plantation and property would be listed on Bursa Malaysia, while trading and logistics would remain under Sime Darby.

#Qatar Islamic Bank's dollar #sukuk books top $1 billion -lead

Order books for Qatar Islamic Bank's planned dollar five-year sukuk have topped $1 billion. The senior unsecured deal is part of a $3 billion sukuk programme. It will be of benchmark size, which conventionally means upwards of $500 million. Initial price guidance for the Islamic bond was 145-155 basis points over mid-swaps. Citi, Emirates NBD Capital, HSBC, Noor Bank, QInvest and Standard Chartered Bank have been appointed to lead the transaction.

Islamic finance transaction broadens investor base for the Africa Finance Corporation

In 2016 the Africa Finance Corporation (AFC) sought to raise financing at competitive pricing levels to fund a number of new infrastructure projects in Africa. It also aimed to diversify its investor base in the process. This objective was achieved through the successful issue of a Murabahah Sukuk. The AFC initially sought to raise US$100 million, but upsized its issuance o $150 million and was still oversubsribed. Emirates NBD Capital, Mitsubishi UFJ Financial Group and Rand Merchant Bank acted as joint bookrunners and joint lead managers. Emirates NBD Capital also acted as the sole global coordinator. This transaction was awarded the 2017 Deal of the Year in the category Islamic Finance in Africa by The Banker magazine.

Hogan Lovells advises on the first #Sukuk to be listed on ISE's Global Exchange market

Hogan Lovells has advised Aktif Bank on the first Sukuk ever to be listed on the Global Exchange Market of the Irish Stock Exchange (ISE). The $118million Sukuk was issued under a mudarabah structure with GAP Insaat Yatirim ve D?s Ticaret, a Turkish construction company. While the Irish Stock Exchange has listed Sukuk historically, this is the first Sukuk to be listed on the ISE's Global Exchange Market. The Hogan Lovells team was led by Imran Mufti (Partner, Dubai), with support from Annalisa Feliciani (Counsel, Rome), Ahmet Kalafat (Senior Associate, Dubai) and trainees Marjun Parcasio and Luigi de Angelis. Onur Aksoy from Aktif Bank said this Sukuk represents a milestone for Islamic capital markets originating out of Turkey. He added that Aktif Bank was pleased to work with the Hogan Lovells team, benefitting from their deep understanding of Islamic finance and capital markets.

#UAE’s Dana Gas begins refinancing talks on $700 mln #sukuk

United Arab Emirates' energy producer Dana Gas has started refinancing discussions with the holders of its $700 million sukuk maturing in October 2017. The company has faced a cash shortage in the last period and is now planning to restructure its dollar sukuk which was issued in May 2013. Dana Gas CEO Patrick Allman-Ward refused to comment. The energy producer in April repaid an outstanding $60 million loan for its Zora gas field project in the UAE to avoid a breach on the facility. Dana is owed receivables of about $1 billion from Egypt and the Kurdistan Regional Government. Its cash balance as of the end of March was $298 million, slightly below $302 million as of the end of last year. To focus on cash preservation, the company reduced its operational and capital spending in the first quarter.

#Tunisia starts preparatory work for debut #sukuk issuance

The government of Tunisia is preparing its first ever issuance of a sukuk with the Tunisian stock exchange, Bourse de Tunis and Nasdaq Dubai. Preparation work will consider commercial, legal and regulatory issues, including sharia-compliance aspects. This January finance minister Lamia Zribi said that Tunisia needs about $2.85 billion in external funding in 2017 and plans to issue a sukuk of $500 million to cover its budget deficit. Then in February the North African country issued a €850 million bond with a seven-year maturity.

Dubai repays $600m #sukuk certificates

The Government of Dubai has announced that the $600 million (Dh2.2 billion) Sukuk Trust Certificates issued on May 2, 2012 reached maturity on May 2, 2017. Upon maturity, all the certificates were redeemed in full along with the accrued profit. According to Abdul Rahman Saleh Al Saleh, Director-General of the Department of Finance, this settlement reaffirms the government’s commitment to deal with its repayment obligations in a proactive manner. It also strengthens the government’s resolve to honour all its financial obligations on time.

CASE STUDY: Etihad Lands Largest #Sukuk Debut in #MENA #Aviation History

#UAE-based airline Etihad Airways tapped the Islamic finance market with the largest ever sukuk issuance in the MENA region’s aviation history. In November 2016, Etihad Airways made its debut on the debt capital markets with a benchmark US$1.5bn sukuk deal. Etihad was initially rumoured to be raising US$500mn, but there was strong demand and the company’s debut US$1.5bn sukuk became the highest rated paper from an airline issuer. The book consisted of high-quality investors from the MENA region, Asia and Europe, creating significant price tension that enabled Etihad to optimize pricing and issue size. Banks dominated the distribution cross-section (77%), while 13% of the notes were allocated to fund managers, 5% to private banks, 4% to insurance and pension funds, 1% to other investors. The 5-year sukuk was launched under the newly established Islamic Trust Certificate (Sukuk) programme and represented a landmark debt capital market transaction.

RAM: Q1 global #sukuk issuance at US$22.2bil

According to RAM Ratings, global sukuk issuance reached US$22.2 billion (US$1=RM4.33) at the end of March, a marginal decrease from US$24.1bil recorded in the same period last year. Malaysia maintained its leadership by accounting for 38.5% of the total issuance. The ratings agency said Indonesia was next (24.7%) followed by Qatar (9.9%) and the United Arab Emirates (9%). The outstanding global sukuk summed up to US$346.7bil, as at end-March 2017, with Malaysia maintaining its leadership by commanding 48% of the amount. Ruslena Ramli, Head of Islamic Finance at RAM Ratings, said that other Gulf Cooperation Council nations are expected to include sukuk issuance as a debt management strategy. On the domestic front, outstanding Malaysian sukuk expanded 11.5%,year-on-year, to RM691.4bil, as at end-March 2017, from RM620.1bil recorded in the same period last year.

#Saudi Electricity in talks with banks for dollar #sukuk issue - sources

State-controlled utility Saudi Electricity is in talks with regional and international banks about issuing a US dollar-denominated sukuk. A number of companies in the kingdom are considering sukuk issuance to offset a decline in revenues due to lower oil prices. Oil giant Saudi Aramco issued a debut $3 billion-equivalent sukuk in the Saudi local market in April, while ACWA Power is expected to issue an international bond of at least $600 million this week. Saudi Electricity issued $2.5 billion in sukuk in 2014, split between a $1.5 billion sukuk maturing in 2024 and $1 billion due in 2044. The company recently repaid a $500 million five-year sukuk it issued in 2012.

Boeing Looks to Islamic Finance and #Sukuk for Funding

Boeing Capital is exploring opportunities for Islamic finance in the aviation sector and the possibility of including aircraft finance in the Islamic sukuk market. This way, an aircraft finance portfolio would be secured by an instrument known as the Enhanced Equipment Trust Certificate. Since 2006, Boeing Capital has hosted annual airline planning seminars for financiers in the Middle East. Emirates Airlines has issued sukuk most recently in 2015 compromising of a 10 year sukuk for the value of $913 million. Guaranteed by the UK Government, the sukuk was priced on 25 March at 2.471%. Emirates also issued in 2013 a $1 billion sukuk 10 year sukuk which was priced at 3.875%. Ethihad Airlines issued a sukuk in November 2016 for $1.5 billion which was priced at 3.86%.

Introducing #sukuk bonds in #Malta

Discussion about sukuk bonds is on the increase. The government of Malta has also considered issuing this type of security. Meanwhile, many established players on the international capital markets are issuing sukuks. A sukuk has a secondary market in the same way as a typical bond has and investors may buy, hold or sell the sukuk after this has been issued in the primary market. Hence, liquidity considerations are also relevant for sukuk bonds. The buyer of a sukuk bond is indirectly buying an asset that has value rather than entering into a loan obligation with the issuer of a typical debt instrument. Importantly, the number of investors in the Islamic world cannot be ignored and therefore Sharia compliant vehicles capable of attracting their wealth are increasingly relevant. The sukuk is a good starting point for issuers to tap into this reality.

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