IslamicFinance.de

Moody's Investors Service has today downgraded the Ba2 ratings for Dar Al-Arkan Real Estate Development Company, Saudi Joint Stock Company , Dar Al-Arkan International Sukuk Company II and the US$450 million USD Certificates ("sukuk") to Ba3. The outlook is stable.
The reason is a combination of:
(1) DAAR's weaker than anticipated operating performance continuing in the third quarter of 2010 attributed to lower land sales, resulting in a departure from Moody's original expectations where land sales are an important part of the funding mix;
(2) DAAR's weaker than anticipated financial metrics, such as Moody's adjusted debt to book capitalisation (LTM 35.3% per end of September 2010), or FFO/Debt (LTM 18.4% per end of September 2010) which are not in alignment with Moody's guidelines for the Ba2 rating category;
and (3) the negative free cash flows DAAR has generated over the first nine months of 2010

There is the possibility that Senegal will sell its first sukuk with involvement from Citigroup Inc.
The West African nation is considering the bond to strengthen ties with investors and governments in the Middle East.
The funds raised may be used for improvements in roads and energy.

The federal government has achieved 65 percent target of Rs 80 billion. They borrowed through new 3-year Government of Pakistan Ijara Sukuk in its first auction. The State Bank accepted only Rs 51.837 billion bids.
The cut-off margin over benchmark will be zero basis points. The benchmark is 6-month MTB Auction Weighted Average Yield.
Sources in banking sector, are expecting another healthy participation in the second auction to be held on December 13, 2010.

The Islamic Bank of Thailand plans to issue THB5 billion ($169.15 million) in long-awaited Islamic bonds by the first half of next year if the interest rate environment remains conducive.
In 2011, income contribution from the retail business is expected to rise to 40%-45% of operations and reach 60% in 2012.

North east company International Innovative Technologies (IIT), UK, issued a Sukuk. The 4-year, USD 10 mn musharaka sukuk – small by international capital markets standards – was placed privately with Millennium Private Equity and regulated by Dubai Financial Services Authority.

Bahrain-based Tharawat Investment House has distributed more than nine per cent of sukuk profits for its key fund.
The Islamic investment, which was regulated by the Central Bank of Bahrain, has announced the distribution of profits for Tharawat Sukuk Fund in excess of 9pc, which became due last month for the first six-month period from February to September.
The announcement by Tharawat of the distribution of profits on time comes against a backdrop of ongoing fluctuations on the world and regional markets, reflecting the strength of the company's performance, its portfolio and sound strategy pursued by the portfolio for generating high returns to its investors.
The fund buys sukuk on the preliminary and secondary capital markets.

Kuwait Finance House (KFH) CEO Mohammed Al-Omar stated that that the Fatwa and Shariah Supervisory Authority has embodied the moral and social responsibility towards the society as a unit that operates in harmony to protect the client by ensuring that all banking transactions are Shariah compliant. The authority has played a pivotal role in developing numerous products that caused a paradigm shift in the in the history of Islamic banking. He appealed to governments to resort to Sukuk, since Sukuk have greatly succeeded in financing many projects, which made Sukuk highly demanded by worldwide.
Al-Omar added in a paper that he presented during the Islamic Financial Institutions Forum in Beirut, that Sukuk are considered to be the Shariah compliant alternative for bonds, were not granted an opportunity to highlight its role as a suitable financing tool, despite the advantages that Sukuk have, such as creating assets that have a specific value, which makes the financing process based on real tangible assets, in addition to the fact that it does not burden governments and companies.

Persian Gulf issuers are choosing to sell non-Islamic bonds instead of sukuk in the borrowing rush that has followed Dubai World’s debt restructuring.
The abundance of liquidity in the non-Islamic debt market, the enforceability of investors’ rights in defaults and the extra cost associated with Islamic bond documentation are steering issuers away from sukuk, Unicorn Investment Bank BSC’s senior vice president of capital markets said.

THE Jeddah-based Islamic Development Bank will be preoccupied with two developments in 2011 apart from its established plan of action. This is the progress toward the launch of its mega bank project and the other is the continuation of its trust certificate (sukuk) program.
The mega bank project was promoted by Saleh Kamel, head of Dallah Albaraka Group, who has been trying to get it launched for the last few years. But his failure to get the project started off through the support of both government and private investors saw the project somehow passed on to the IDB. The plan is to launch a mega bank that will effectively be an Islamic Interbank bank, with the aim of providing short-term liquidity to the global Islamic banking market and of promoting the trading of sukuk in the secondary market by acting as a market maker.
CIMB of Malaysia, Citigroup, HSBC and Standard Chartered Bank acted as joint lead managers and joint book-runners, and NCB Capital of Saudi Arabia acted as co-lead manager for this transaction. The success of IDB's transaction was underpinned by a comprehensive international road show covering Asia, the Middle East and Europe.

Private Financial Services Department Manager at Kuwait Finance House (KFH) Talal Al-Nesf claims demand for private Islamic banking services has grown rapidly during the past two years, despite the impact of the financial crisis.
However, Al-Nest also pointed out that private banking clients have reassessed their objectives and strategies, becoming more conservative while also seeking profitable products with minimal risks. Such an approach is contrary to their approach before the crisis, where they were willing to take high risks in return for high returns in light of the available opportunities and liquidity.
KFH is currently considering new products from all aspects, especially the level of risk, the expected returns, and the estimated exiting time. Those products are expected to be offered through funds that invest in the sectors of Ijarah and shipping. In addition, Al-Nest stated that KFH is expected to boost the Sukuk market.

King & Spalding announced today that Rizwan Kanji, a leading debt capital markets practitioner, is joining the firm as a partner in its Dubai office. Kanji will have a leading role in King & Spalding's debt capital markets and sukuk practice.
Kanji joins King & Spalding from Norton Rose, where he led its Middle East debt capital markets practice. He has advised on several recent landmark sukuk and conventional transactions, including the first Turkish sukuk.
King & Spalding has a team of nearly 30 lawyers in its Dubai, Abu Dhabi and Riyadh offices specializing in complex commercial, corporate and financial transactions as well as project development, construction and engineering, with particular emphasis on matters related to the energy industry.

Pakistan’s largest Shariah funds plan to bid for the 80 billion rupees of Islamic debt the government will offer in coming weeks after a 14-month suspension of sales.
Pakistan is selling the debt as the nation’s Islamic banking assets increased an average 30 percent in the past four years. Investors might prefer securities due in a year or less after record floods in August pushed up prices of goods and forced the central bank to raise its benchmark interest rate to the highest level in 17 months, according to Al Meezan and NBP Fullerton.

The global Islamic bond market could see issues of close to $46bn in 2011 as investor confidence returns and new issuers emerge in the growing Islamic finance industry.
With economies recovering from the financial crisis and the restructuring of state-owned entities like Dubai World gaining momentum, sukuk is once again going to emerge as the preferred way to raise money, Humayon Dar told Reuters on the sidelines of a conference in Dubai.

Until recently the issuance of Islamic bonds, or sukuk, was confined to the Muslim world. But now a number of international borrowers are tapping the markets, including Nomura Holdings in Japan and Europe's first corporate borrower, International Innovative Technologies.
The ratings agencies Moody’s and Standard & Poor’s say they expect to see a rise in the number of sukuk issues by new players over the next 12 months, including issues by borrowers in Singapore, Australia, Luxembourg, Thailand, Hong Kong, France and Russia.
While the Islamic Financial Service Board and the accounting and auditing organization have defined standards for sukuk, defaults over the past year have shown that new guidelines must be set as problems arise, particularly as sukuk start to generate global attention.

Islamic banks in the country are developing a local currency sukuk index to serve as a benchmark for sharia-compliant fixed income securities.
The index will track highly liquid, high grade bonds, including on-the-run ringgit denominated sukuk, said the Association of Islamic Banking Institutions Malaysia, which includes the local units of Al Rajhi and Kuwait Finance House.
Malaysia has the world’s largest sukuk market

The plan to create national Shariah boards to oversee sukuk sales is drawing criticism from bankers and lawyers who say the groups would increase bureaucracy in the $1 trillion Islamic finance industry.
The Accounting & Auditing Organization for Islamic Financial Institutions, a leading global regulator, is in the final stages of a plan recommending governments appoint panels of scholars and experts at the national level to rule whether products comply with the religion’s tenets, Mohamad Nedal Alchaar, secretary-general of the Manama, Bahrain-based body, said in an interview in Kuala Lumpur on Oct. 26. The proposal will be submitted early next year.
The regulator says such a system will help clarify standards and bolster investor confidence in an industry whose assets are forecast by the Kuala Lumpur-based Islamic Financial Services Board to almost triple to $2.8 trillion by 2015. The changes risk adding bureaucratic hurdles and slowing approvals at a time when sales are down 19 percent this year, according to CIMB-Principal Islamic Asset Management Sdn. and Atlanta-based law firm King & Spalding LLP.

HEWLETT-PACKARD (HP), the world's largest technology company, has issued its maiden US$100 million (RM310 million) sukuk to part- finance the development and construction of its multi-million-dollar next generation data centre (NGDC) in Cyberjaya.
The company, via its Malaysian subsidiary HP Multimedia Sdn Bhd, and CIMB Islamic Bank Bhd signed an agreement to formalise the Islamic term financing facility agreement in Kuala Lumpur yesterday.
At the signing, CIMB Islamic was represented by group chief executive officer Datuk Seri Nazir Razak, while HP was represented by HP Enterprise Services senior vice president for Asia Pacific and Japan, Kevin Jones.
The loan will help finance the development of HP's first phase NGDC project, with an option to be extended to subsequent phases in due course.
Upon completion in 2016, the campus will stand as one of HP's four global network centres, alongside India, Mexico and Costa Rica.

SOUTH Korea is keen to foster further cooperation with Malaysia to beef up its Islamic finance and services sector that is at its infancy stage.
Korea Investment and Securities head of Islamic finance Yul-Hee Lee said there has been many enquiries made by Korean companies on how it can raise funds using the sukuk.
Lee noted that the South Korean government is in the midst of fine-tuning laws on Islamic finance and introducing tax incentives but development is still at its early stage and will take time to be ready.
The South Korean government announced an Islamic financing tax regime for sukuk as early as August 2009.
South Korean firms have been using Islamic finance products for a couple of decades, but only in relation to their business activities in the Middle East.
Post-global economic crisis, Lee said the country is considering other options and diversifying its investments. Part of its plan is to tap into the Islamic finance market.

Abu Dhabi Islamic Bank, or ADIB, the emirate’s largest Islamic lender by market value, is planning to sell five-year benchmark Islamic bonds, or sukuks, this week, according to people familiar with the matter.
Company officials, who have been on a series of investor meetings in Asia, Europe and the Middle East since Oct. 20, end their roadshow Tuesday. Benchmark-sized bond deals are those worth at least $500 million. The securities are expected to price later this week.

Cagamas Bhd, the national mortgage corporation, will look at issuing up to RM2bil in new Islamic medium term notes, said chief executive officer Steven Choy.
A business daily reported recently that Cagamas was expected to issue another landmark sukuk after the success of its benchmark Sukuk Al-Amanah Li Al-Istithmar (Sukuk ALIm) in July.
During the panel discussionon Islamic Finance Developments and Expansions in Asia, Choy said Cagamas experienced its fair share of challenges in the secondary market for its mortgage loan deals.
Islam Bank of Thailand president Dheerasak Suwannayos added that political will was needed to back the acceptance of Islamic finance in a country.
Businesses among the Muslim community were predominantly family-owned, hence the hesitation in letting strangers into the businesses.