Sukuk

Fitch Rates Kuveyt Turk's #Sukuk 'BBB(EXP)'

Fitch Ratings has assigned Kuveyt Turk's proposed US dollar-denominated sukuk certificates an expected 'BBB(EXP)' rating. The expected rating is in line with Kuveyt Turk's Long-Term Issuer Default Rating (IDR) of 'BBB', which has a Negative Outlook. The issuer is KT Kira Sertifikalari Varlik Kiralama (KKSVK), which is wholly owned by Kuveyt Turk. The documentation includes a negative pledge provision that is binding on Kuveyt Turk, as well as financial reporting obligations, covenants, Kuveyt Turk event (including cross default) and change of control clause. Certain aspects of the transaction will be governed by English law while others will be governed by Turkish law.

Maybank Islamic, CIMB Islamic partake in IILM’s US$1.11bil #sukuk

The International Islamic Liquidity Management Corporation (IILM) has conducted an auction of US$1.11bil (RM4.63bil) three-month tenor sukuk priced at 1.35389% profit rate. The IILM said the 11 primary dealers that participated in the Sukuk offering were Abu Dhabi Islamic Bank, Al Baraka Turk, Barwa Bank, Boubyan Bank, CIMB Islamic Bank, Kuwait Finance House, Maybank Islamic, National Bank of Abu Dhabi, Qatar Islamic Bank, Qatar National Bank and Standard Chartered Bank. The IILM Sukuk is rated A-1 by Standard & Poor's Rating Services and the 29th series brings the total cumulative amount of the IILM Sukuk that were issued and reissued to US$21.14bil (RM88.14bil).

#Sukuk company granted #tax exemption

In #Pakistan the Federal Board of Revenue (FBR) allowed exemption from withholding tax on purchase of immovable property by the Second Pakistan International Sukuk Company. The company has already enjoyed several exemption and concessions, exemption from levy of various advance taxes, profit on debt and tax on income from property. This further exemption was granted to strengthen the Islamic debt market by attracting investors by grant of tax concessions.

Maybank Islamic, CIMB Islamic partake in IILM’s US$1.11bil #sukuk

The International Islamic Liquidity Management Corporation (IILM) has conducted an auction of US$1.11bil (RM4.63bil) three-month tenor sukuk priced at 1.35389% profit rate. The IILM said the 11 primary dealers that participated in the Sukuk offering were Abu Dhabi Islamic Bank, Al Baraka Turk, Barwa Bank, Boubyan Bank, CIMB Islamic Bank, Kuwait Finance House, Maybank Islamic, National Bank of Abu Dhabi, Qatar Islamic Bank, Qatar National Bank and Standard Chartered Bank. The IILM Sukuk is rated A-1 by Standard & Poor's Rating Services and the 29th series brings the total cumulative amount of the IILM Sukuk that were issued and reissued to US$21.14bil (RM88.14bil).

Source: 

http://www.thestar.com.my/business/business-news/2016/10/12/maybank-islamic-and-cimb-islamic-partake-in-iilms-us$1pt11bil-sukuk/

#GCC sovereigns raise $87bn in bonds, #sukuk since Jan 2015: Samba

According to Samba Financial Group, GCC sovereigns have raised $87bn in both domestic and international bonds and sukuks since January 2015. The largest international issuance so far is the $9bn offering from Qatar in late May. Abu Dhabi also issued eurobonds worth $5bn in May in both five and 10 year tenors, while Oman issued $2.5bn of bonds in May. The markets are waiting on a Saudi issuance, which Samba thinks will be around $15bn later this year, though the government has already secured a syndicated loan worth $10bn. Corporate international debt issuance is also on the rise, with the majority of offerings coming from financial institutions. Since January 2015, UAE banks have issued $10.9bn in bonds. According to Samba, GCC stock markets suffered large losses at the beginning of the year, owing to the general risk-off sentiment and a further decline in oil prices.

Nasdaq Dubai, IdealRatings launch benchmark indices to track performance of #Sukuk

Nasdaq Dubai and IdealRatings has announced the launch of benchmark indices that track the performance of global Sukuk, in order to provide investors with new data to make informed trading decisions. The data includes daily movements in price and total return, with monthly updates on yield and other key indicators. It tracks a universe of more than 1,800 Sukuk globally, with eligibility criteria including a minimum issue size of 100 million US dollars. The Global Sukuk Index covers all currencies and has five sub-indices. The sub-indices reflect distinct segments of the market, which are: investment grade issuances, issuances by sovereigns, issuances by corporates, issuances by financial institutions and GCC issuances. According to Hamed Ali, CEO of Nasdaq Dubai, the indices add a valuable new stream of information to investors’ existing trading tools.

Moody’s: Sovereign #sukuk issuance stable, SEA leads on volumes

According to Moody’s Investor Services, there is stable flow of sovereign sukuk issuance this year, which is set to touch US$28 billion (US$1 = RM4.15) in Southeast Asia. Among the Southeast Asia countries, Malaysia and Indonesia continue to regularly issue long-term sovereign sukuk while Gulf countries favour conventional debt structure to finance their deficit. Moody’s Vice President Gabriel Torres said the governments of Cote d’Ivoire, Senegal and Sharjah returned to the sovereign sukuk market in 2016, but issuance volumes are primarily supported by more regular issuers, such as Indonesia, Malaysia and Turkey. Sub-Saharan African sovereign sukuk issuance is likely to remain active as governments set up regulatory frameworks for a retail Islamic banking sector and test market appetite.

APM to establish #sukuk programmes

In #Malaysia APM Automotive Holdings has proposed to establish an Islamic commercial papers (ICP) programme and Islamic medium term notes (IMTN), with a combined nominal value of up to RM1.5 billion. In a bourse filing APM said the ICP and IMTN programmes will have a tenure of seven years and 20 years respectively, from the date of first issue. The proceeds from the issuance of the sukuk murabahah shall be utilised by the company for general corporate purposes and to refinance future financing of APM and its subsidiaries. APM assured that the utilisation of the proceeds of the sukuk murabahah programmes would be at all times for syariah-compliant purposes.

NB: Figure was amended from RM 3 bn to RM 1.5 bn following correction in original source.

#Sukuk auction criticised

In #Pakistan Chair­man of the Senate Standing Committee on Finance Senator Saleem Mandvi­walla has strongly criticized the issuance of $1 billion sukuk. He said that the hurried decision was an act of im­­maturity by the government and it was expected that the rates would be high. Senator Mandviwalla is surprised that Eurobonds which carry sovereign guarantees were sold at 8.25pc interest rate and sukuk, which are guaranteed by assets, are sold at 5.5pc. He said that the federal government also blamed the higher rate on Pak-India border tensions. He added that it would have been better to wait with the issuance for a more suitable time.

UPDATE 1-#Nigeria cenbank set limits on banks' investment in govt Islamic bonds

Nigeria's central bank has set commercial banks' investment in Islamic bonds issued by state governments to 10% of the total amount on offer and fixed a maximum tenor of 10 years for the bonds. The central bank said it considered the need to issue the guidelines to enhance the quality of sukuk instruments and to grant liquidity status at its discount window as well as for banks' liquidity ratio. Nigeria is working out details for issuing a debut sovereign sukuk and also planning to sell Eurobond to raise $1 billion this year. The regulator assigned a weight of 20% for capital adequacy for banks' investment in sukuk and a weight of 50% for Islamic bonds that do not qualify as liquid assets.

#Sukuk issuance to lure foreign investment

The re-entry of #Pakistan into the international Islamic bond market after a gap of two years with the issuance of one billion dollars Sukuk will help the country bolster its external account position. According to analyst Saad Hashemy at Topline Securities, Pakistan's ability to raise funds from the global financial markets at the historic low rates shows investors' optimism about the economic prospects. The government raised $1.0 billion through the issuance of five-year dollar-denominated Sukuk at the historic low rate of 5.5%. The investors across the world showed interest in parking around $2.4 billion in the bonds. Pakistan’s credit rating has remained stable or improved during the last few years. International credit rating agencies Moody’s, Fitch and Standard & Poor’s (S&P) rated Pakistan as B3 (stable), B (stable) and B (positive), respectively in their last ratings.

CBJ to release Islamic #sukuk worth JD34m

The Central Bank of #Jordan (CBJ) announced it will release the first sovereign issue of Islamic sukuk to fund the government's special purpose vehicle projects. The CBJ said the value of the new issue is JD34 million for a five-year term, to be issued on October 17, 2016 and due on October 17, 2021. The CBJ expected these sukuks' revenues to stand at 3%, with paying revenues, after adding a percentage of the sukuk value, via 10 equal payments on April 17 and October 17 of each year. The issuance is released in cooperation between the government, Japan International Cooperation Agency and the Islamic Corporation for the Development of the Private Sector. The CBJ is the issuance manager, while the Jordan Dubai Islamic Bank is the secretary of the issuance.

#Senegal #sukuk leads #IvoryCoast and #Togo deals

Senegal raised FCFA200bn (around $341m) from a sukuk that raised FCFA50bn more than originally planned. Sukuk Etat du Senegal offers 6% a year profit margin, paid half yearly with a two-year grace period. The asset is backed by shares in the Léopold Sedar Senghor international airport. Senegal was the first country in the West African Economic and Monetary Union’s (WAEMU) to issue sukuk, with a debt deal worth FCFA100bn back in June 2014. Ivory Coast aims to raise FCFA150bn as part of a two tranche FCFA300bn sukuk program set up last year. The transaction is expected to deliver a yield of 6.5% and have a tenor of seven years. Meantime, Togo also aims to raise FCFA150bn through a 10-year sukuk offering a 6.5% yield.

Why commodity-linked #sukuks should be introduced

A sukuk is a sharia-based hybrid instrument that can have the features of both a conventional debt instrument and of equity. Sharia requires all financial contracts to be rooted in real sector activities. Sukuk has coupons paid at prefixed times in the future. However, the quantum of the coupon is not prefixed, but depends on the performance of the sukuk-issuing enterprise. This ensures that the sukuk holders partake in the risk of the enterprise. A sukuk can be issued for any commodity. The commodity-linked sukuk would not only be a win-win instrument for both investors and issuers, it would also be beneficial to society.

CORRECTED-African sovereign trio add to growing appeal for #sukuk

#Senegal has upsized its second sale of sovereign sukuk, with #Ivory Coast and #Togo expected to close their own deals in coming days. Senegal issued a debut sukuk in 2014 and returned to the market in July with a 10-year deal paying a 6% profit rate backed by assets from Dakar's international airport. Senegal's sukuk raised a total of 200 billion CFA francs ($341.5 million) from an initial plan for 150 billion CFA francs. Ivory Coast is completing a sale of 150 billion CFA franc worth of 7-year sukuk, while Togo aims to raise 150 billion CFA francs from its debut sukuk, which has a 10-year maturity and 6.5% yield. Niger has also signed up for a sukuk programme to raise 150 billion CFA francs in two phases, although a timing has yet to be determined.

Moody's assigns (P)B3 to #Pakistan's sovereign #sukuk

Moody's Investors Service has today assigned a provisional (P)B3 rating to the proposed US dollar Trust Certificates to be issued by The Third Pakistan International Sukuk Company. The (P)B3 rating reflects Moody's view that the sukuk certificate holders will effectively be exposed to the sovereign credit risk incorporated in the government's issuer rating. Payment obligations represented by the securities are ranked pari passu with other senior, unsecured debt issuances of the Government of Pakistan. The rating for the Government of Pakistan captures moderate economic strength, structurally large fiscal imbalances, a high government debt burden and high susceptibility to political event risks.

Fitch Rates #Bahrain's Upcoming USD #Sukuk and Bonds 'BB+(EXP)'

Fitch Ratings has assigned Bahrain's proposed US dollar-denominated sovereign global sukuk trust certificates, to be issued by CBB International Sukuk Company 5 (CBB5), an expected 'BB+(EXP)' rating. Fitch has also assigned Bahrain's proposed US dollar-denominated bonds an expected 'BB+(EXP)' rating. The expected ratings are in line with Bahrain's Long-Term Foreign Currency Issuer Default Rating (IDR), which was downgraded to 'BB+' with a Stable Outlook in June 2016. Certain aspects of the sukuk transaction will be governed by English law while others will be governed by laws of Bahrain. Fitch's rating on the certificates reflects the agency's belief that the Bahraini government would stand behind its obligations.

RAM Ratings reaffirms Litrak’s RM1.45b #Sukuk

RAM Ratings has reaffirmed the AA2/Stable ratings of Lingkaran Trans Kota’s (Litrak) Sukuk Musharakah IMTN I and II Programmes (2008/2023) with a combined value of up to RM1.45bil. The ratings reflect Lebuhraya Damansara-Puchong’s (LDP) robust traffic profile, underscored by its strategic alignment through major townships, which supports its strong debt-servicing capability. According to RAM Ratings, Litrak will preserve its strong cashflow-generating ability, with an average projected annual pre-financing cashflow of about RM215mil throughout the Sukuk’s tenure. This translates into solid debt coverage, enabling the company to maintain a strong finance service coverage ratio of at least two times over the same period.

#Sukuk adoption hurdles decrypted

The central benefit of sukuk is that they give issuers access to a far broader range of investors than a conventional bond can. Their reliance on real, tangible assets and their principle of sharing risk makes them valuable for any smart risk management investment portfolio. While there exists thriving markets for them in the Middle East and southeast Asian Muslim countries, an absence of Western governments is marked. Aside from a few symbolic issues by governments in the UK, South Africa, Hong Kong and Luxembourg, domestic markets have been slow to develop.

ECC waives 10 types of taxes on Islamic bonds

The #Pakistani government waived 10 taxes on the upcoming international Sukuk bond issue, which is expected to raise at least $750 million. The government is going to tap the international debt market next month to borrow $750 million to $1 billion by pledging the Islamabad-Lahore Motorway. Headed by Finance Minister Ishaq Dar, the Economic Coordination Committee (ECC) of the cabinet granted tax exemptions on the Islamic bonds. This decision violated the Supreme Court judgment that barred the ECC from taking decision on fiscal matters without prior approval of the federal cabinet. The ECC also approved to reduce prices of imported urea fertiliser from Rs1,310 per bag to Rs1,200 per bag, giving Rs30.4 million subsidy.

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