IslamicFinance.de

The chief executive of the Islamic Corporation for the Development of the Private Sector (ICD) has stepped down to take a role with the Saudi government. Khaled Al-Aboodi joined the ICD in 2001 and took over as chief executive officer in 2007. Starting next month, he will join the Saudi Agricultural and Livestock Investment Co (SALIC) as Managing Director. The ICD has appointed Mohammed Al Ammari to lead the multilateral body on an interim basis, until a new chief executive is selected. As the private sector arm of the Islamic Development Bank, the ICD is tasked with supporting economic development across its 53 member countries.

Saudi developer Salman Abdullah Bin Saedan Real Estate Group is planning a debut sukuk issuance in the coming months. Proceeds from the sukuk would be used for Saedan’s social housing projects, which aim to address a shortage of affordable residential properties in Saudi Arabia. The $1 billion sukuk programme will be set up by Ibdar Bank, which was formed in 2013 through a three-way merger of smaller Islamic lenders. The bank's Director of Capital Markets Ikbal Daredia said the sukuk programme would be listed on the Irish Stock Exchange with a possible listing on Nasdaq Dubai. Ibdar Bank aims to bring on board one or two international banks and regional partners as joint lead managers for the deal.

United Arab Emirates energy producer Dana Gas swung to a net profit of $83 million in 2017 after a $1 billion payment as part of a settlement with the Kurdistan Regional Government (KRG). However, Dana posted a net loss of $42 million in the fourth quarter of last year. Profits in the fourth quarter were affected by an impairment charge of $34 million against the Zora gas field in the United Arab Emirates. Dana, which has struggled to collect receivables from Kurdistan and Egypt over the past four years, collected $466 million from the KRG and $164 million from Egypt last year. Dana’s cash balance at the end of 2017 amounted to $608 million, more than double the $302 million it had at the end of 2016. Dana Gas is at the centre of a legal dispute with the holders of a $700 million sukuk that the company refused to redeem on the grounds that the notes were no longer sharia-compliant. Legal proceedings in English and UAE courts are continuing.

Dubai's Ilyas & Mustafa Galadari Group (IMG) is in talks with banks to restructure a 1.2 billion-dirham ($326.7 million) syndicated loan. The group is now looking to upsize its existing loan facility due to cost overruns. The loan taken in 2014 was used for corporate debt and to build the Worlds of Adventure theme park. IMG opened it in August 2016, with a total area in excess of 1.5 million square feet and the capacity to accommodate more than 20,000 visitors every day. According to IMG, the upsizing of the facility was linked to a cost overrun on the pre-opening of the theme park and not due to visitor numbers. However, bankers said one reason for the talks was low footfalls. The company is close to reaching an agreement with creditors and extending the loan maturity. In return, additional covenants would be put in place to allow banks to monitor the company’s financial situation better.

The government of Uganda has approved regulations covering Islamic banking. Governor Emmanuel Tumusiime-Mutebile said that once the regulations are gazetted, the central bank would be open for applications from financial institutions to offer sharia-compliant products. Uganda joins several African countries that have sought to develop interest-free banking in recent years, including Nigeria, Morocco and Senegal. Despite small populations of Muslims, countries such as Uganda, Kenya and Ethiopia are also developing the sector to expand financial access and inclusion. In December, the central bank of Uganda became an associate member of the Islamic Financial Services Board (IFSB), one of the industry’s main standard-setting bodies.

First Abu Dhabi Bank has appointed banks to lead a U.S. dollar-denominated sukuk issue. Citi, First Abu Dhabi Bank, KFH Capital, NCB Capital and Standard Chartered will lead the deal, which has a five-year tenor. The sukuk is expected to be of benchmark size, which generally means upwards of $500 million. The bank, formed by a merger of National Bank of Abu Dhabi and First Gulf Bank, is tapping the sukuk market to diversify its funding sources. The planned debt sale would be part of the bank's $2.5 billion sukuk programme.

Al Rayan Bank has mandated banks to raise 250 million pounds ($352 million) via sukuk, using a residential mortgage-backed securitisation. Al Rayan has appointed Standard Chartered and Masraf Al Rayan to arrange investor meetings. The sukuk would help fund Al Rayan's ongoing efforts to expand into commercial real estate, private banking and financing for small- and medium-sized businesses. The portfolio would consist of Home Purchase Plans secured by residential properties, with a current pool balance of approximately 300 million pounds. The sukuk would securitise contracts known as diminishing musharakah with ijara finance, akin to reducing co-ownership arrangements, secured by residential properties located in England and Wales.

The Malaysia-based Islamic Financial Services Board (IFSB) plans to develop more detailed guidance on financial safety nets for Islamic finance. Such efforts are important as Islamic finance expands in both established and new markets, while transactions are under heightened scrutiny due to the perceived risk of non sharia-compliance or sharia risk. IFSB Secretary General Zahid ur Rehman Khokher said the safety net may include more detailed work on deposit insurance in 2018, while work on dispute resolution and insolvency may be completed later. The IFSB currently has a membership of 75 national regulators. Last month, the IFSB admitted eight new members, including Saudi Arabia’s Capital Market Authority, the Abu Dhabi Global Market and German financial watchdog Bafin.

Dubai Islamic Bank (DIB) plans to raise capital in 2018 to help support an expected double-digit rise in loan growth. DIB's CEO Adnan Chilwan said the bank was considering options including a rights issue and an issue of Islamic bonds. The final decision will be subject to regulatory approvals. The bank is now targeting loan growth of between 10 and 15% in 2018, the same target it set for 2017.

Weeks of talks between UAE energy firm Dana Gas and some local holders of a disputed $700 million sukuk have failed to reach an agreement. Last year, Dana refused to redeem $700 million of maturing Islamic bonds, arguing they were no longer valid under United Arab Emirates (UAE) law because of changes in Islamic financial practice. The move shocked the global Islamic finance industry, as some investors worried it could set a precedent for other sukuk issuers. Dana proposed to swap its sukuk, but creditors rejected the proposal, saying the terms were unfavorable. The case moved to UAE and British courts. Legal proceedings in both countries are continuing, but in November a British court ruled in favor of Dana’s creditors.

The head of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has resigned. Hamed Hassan Merah presented his resignation after more than three years and the board of trustees accepted it. As a complex organisation with 200 institutional members from across 45 countries, the AAOIFI had been slow to respond to issues relating to conflicts of interest and product standardisation. Under Merah, the AAOIFI tackled such issues head on, launching a review of its accounting, auditing and sharia standards. In November, Merah said AAOIFI would now prioritize wider adoption of its standards by engaging national regulators in key markets, including Turkey and Malaysia. Saudi Arabia’s central bank joined AAOIFI as an institutional member in October 2017.

The African Export-Import Bank (Afreximbank) has raised around $260 million via three Islamic finance facilities to support small- and medium-sized businesses in the region. The Egypt-based bank obtained a $100 million financing from the Islamic Corporation for the Development of the Private Sector (ICD). It also signed two financing agreements with the International Islamic Trade Finance Corporation (ITFC) worth $100 million and 50 million euros ($59.8 million) to help finance exports among African countries. Both ICD and ITFC are part of the Saudi-based Islamic Development Bank group of companies.

Turkish authorities have issued detention warrants for 68 shareholders of Bank Asya. The police operation targeted the network of the cleric accused for orchestrating last year’s failed coup attempt. The targeted shareholders all had voting rights to determine the bank’s administrative board. So far 49 of the 68 suspects had been detained. Bank Asya was founded by followers of the U.S.-based cleric Fethullah Gulen and was seized by the state in 2015. According to the Turkish government, Gulen masterminded the 2016 attempted coup, in which more than 240 people were killed by rogue soldiers. Gulen has denied the charges and condemned the coup. Since the abortive putsch, more than 50,000 people, including civil servants and security personnel, have been jailed pending trial and some 150,000 suspended or dismissed from their jobs.

Sukuk issuers are changing the language in documentation for new issues to reassure investors after Dana Gas refused to redeem $700 million of maturing sukuk. Dana Gas said it would not repay sukuk maturing in October because changes in the interpretation of Islamic finance had made the bonds unlawful in the UAE. Issuers are now amending their documentation to preclude the use of this argument. According to Mohamed Damak, global head of Islamic finance at Standard & Poor's, clauses seeking to reduce sharia compliance risk have become normal in the global industry, but the complexity of sukuk makes it difficult to remove the risk entirely. According to Mohammed Khnifer, senior associate at the Islamic Development Bank, sukuk holders and issuers will now rely more on English law and avoid local laws with dollar-denominated issuance.

Qatar International Islamic Bank (QIIB) plans to issue a U.S. dollar-denominated benchmark sukuk in February. Benchmark deals are generally upwards of $500 million. One of the sources said the transaction could go up to $700 million in size. The sukuk issuance would be QIIB’s first debt sale under a $2 billion sukuk programme the bank established in October. The sukuk programme is arranged by QNB Capital, Citigroup and Standard Chartered.

Dubai's Emirates REIT has given initial price guidance in the low-to-mid 5% for its debut U.S. dollar-denominated sukuk. The issuance of the sukuk is expected to be of benchmark size, which conventionally means the higher side of $500 million. The senior unsecured deal, with an expected BB+ rating by Fitch, will price later in the day.

A report by the World Bank and the General Council for Islamic Banks and Financial Institutions (CIBAFI) aims to encourage the sector’s governance. The findings are based on a survey of 77 Islamic banks across 22 countries, covering the industry’s core centres in the Gulf region and Southeast Asia and extending to Islamic banks in Africa and Europe. The report found risk governance was a weak spot for Islamic banks, recommending increased use of independent directors and strengthening the role of risk management officers. Sharia governance is another area of relative weakness, the big issues being the lack of diverse experience of the members on the sharia board and the infrequency of sharia board meetings. The report recommends the development of a new or revised standard for corporate governance that is specific to Islamic banks.

Dana Gas announced it will appeal against a British court’s ruling on its $700 million sukuk, after a UAE court lifted an injunction preventing it from participating in the British proceedings. Dana previously said the sukuk was invalid under UAE law and refused to repay holders of the sukuk which matured at the end of October. The energy producer sought a declaration on the sukuk’s lawfulness at courts in the UAE and Britain. Last month, a British court ruled in favour of Dana creditors, deciding the purchase undertaking was valid and enforceable. Dana has said it aimed to appeal against the ruling because it could not take part in proceedings. A hearing in Sharjah on the validity of the sukuk under UAE law is scheduled for Dec. 25.

Malayan Banking Bhd is Malaysia’s biggest lender by assets. It made higher profits for a 4th quarter in a row, which was driven by rising net interest income and growth at its Islamic banking operations.
Southeast Asia’s third-largest economy has recovered in 2017 after a challenging 2016, when growth slumped to its slowest pace since the global financial crisis in 2009. The turnaround has buoyed business for banks. Maybank posted a net profit of $496.70 million for the 3rd quarter ended September, up 13% a year ago. Its net interest income rose 8.6% while Islamic banking income increased by 24.3%. Revenue climbed 2.7%.
Earlier, CIMB Group Holdings, the number two lender of the country, reported a surprise rise in quarterly profit, helped by an improving domestic economy.
Malaysia‘s central bank has said the economy was on track to register growth of 5.2% to 5.7% this year, and may even exceed that estimate.

Pakistan gained $2.5 billion from selling two U.S. dollar-denominated sukuk and Eurobond issues in New York, according to senior official. These issues had attracted total offers of $8 billion in the process.
Pakistani authorities however decided to only sell $2.5 billion at, according to officials „affordable rates“. In an interview an delegate said: "We have raised $1 billion through five-year sukuk at rate of 5.625% and $1.5 billion from a 10-year Eurobond maturity at a rate of 6.875%," Federal Secretary Finance Shahid Mehmood said.
These two deals have been the largest in the country's history so far. The 10-year bond was the cheapest bond ever launched by Pakistan. Last year the country borrowed $1 billion in the global sukuk market at 5.5%. It also floated a 10-year, $500 million Eurobond at 8.25% in 2015.
The government appointed a consortium of Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank, Deutsche Bank, Dubai Islamic Bank and Noor Bank as the lead managers for conducting sukuk transactions. Noor Bank thereby will manage the Middle East sukuk bond.