Sukuk

Global sukuk cheaper and more plentiful in 2011

November 2011 showed a record number of sukuk issues totaling USD 8.86 billion globally, according to data compiled by Zawya Sukuk Monitor. Major launches contain a global seven-year USD 1 billion sukuk sold by Indonesia in the international markets followed by a similar seven-year USD 750 billion international sukuk by the Central Bank of Bahrain.
On the corporate level, Abu Dhabi Commercial Bank and Abu Dhabi Islamic Bank sold five-year USD 500 million international sukuk each. These five issues advanced sukuk issuance to a record in November.
Major announcements of new sukuk were also made in November - some of which might hit the market as soon as December or during the first half of 2012.

Sharia reverse repo offered to absorb liquidity

Bank Indonesia (BI) stated that it is offering reverse repo for sharia banks and business units to decrease bank liquidity in the financial system.
Reverse repo transactions ask banks to buy at least Rp 1 billion (US$110,000) of government sukuk from the central bank and receive margins when they buy back at an agreed price after a specified time period. This has the purpose to absorbe the liquidity of sharia banks, especially of banks with finance-to-deposit ratios of at least 80% and those that participate in BI’s sharia monetary operation.

Indonesia's cenbank issues rule on sukuk

INDONESIA'S central bank has launched a new regulation that grant the trade of sharia bonds for its reverse repo operations, effective starting Dec 1, in a move aimed at deepening the local sukuk market.
The rule has the purpose to absorbe excess liquidity from the financial system. Indonesian sharia banks can aquire at least 1 billion rupiah (US$110,700) of sukuk from the central bank, for which they will collect transaction margins.

South Africa Seeks Bank Proposals for Inaugural Islamic Bond

South Africa welcomed banks to submit proposals by Dec. 21 for the sale of its first Islamic bond as the continent’s biggest economy seeks to enlarge the access to financing.
It seems that South Africa is a relatively low-risk debtor, which would make its sukuk bonds attractive for Islamic investors searching to mix their portfolios outside the Middle East and North Africa region.
Islamic bonds will also help diversify the government’s funding and investor base.

Kuwait Finance House plans to continue its pivotal role in Turkish market, says Chairman

According to the chairman of Kuwait Finance House in Turkey, Mr. Mohammed Al-Omar, the bank plans to go on with its pivotal role in the Turkish market, in addition to binding its strategy that is based on strengthening economic relations with neighboring countries, and with Kuwait and other GCC countries.
He added that the bank also wants to further offer Islamic products and instruments that can enlarge the horizon of Islamic banking in the Turkish economy, such as sukuk, murabaha, and ijarah. He underlined the fact that the bank presented products that never existed before in the Turkish market, such as the gold account and sukuk.

UK-based fund to treat sukuk as investment, not debt

Solum Asset Management will launch the first “investment sukuk” in the first quarter of next year, considering Islamic bonds as investment vehicles rather than debt instruments.
The 200 million sterling ($310 million) Student Accommodation Investment Sukuk will use equity to supply holders with an annual yield of 4 to 6 %. Risk in the investment sukuk will be based on the assets that are bought by the fund.

Three likely flaws in Goldman Sach's milestone sukuk

In this column, Mohammed Khnifer reveals, after examining the offer circular thoroughly, three possible flaws in the overall structure.
1- Strong indication from the proposed structure and the prospectus as well that the sukuk is not, as they claim, Murabaha, but a Reverse Tawarruq.
2- Strong indication that Goldman will be using, eventually, the proceeds to fund its conventional activities.
3- The so called Murabaha sukuk is listed on the Irish Stock Exchange (ISE). There are some concernes on how the ISE will make sure that the securities will be traded at par value.

Indonesian government to offer retail sukuk bonds next March

The Indonesian government will start proposing retail Islamic debt papers (sukuk) to individual investors in March, after previous issuances drew strong interest, despite the shaky global financial market.
Sales agents would be nominated on January 4 and the offering would take place in March. Government debt papers were appealing to individual investors because the return rates were higher than bank deposits and it was also viewed as safe because of government guarantees.

Emaar to raise $800m loan at a discount to its sukuk

It seems that the Emaar Properties PJSC agreed on an $800 million Islamic loan with three banks that pays 3.5 per cent more than the benchmark rate.
The developer of the world’s tallest tower will also pay fees for the facility, which is supplied by Dubai Islamic Bank PJSC, Standard Chartered Plc and National Bank of Abu Dhabi PJSC. The financing is backed by Emaar’s flagship Dubai Mall.
The so-called profit rate is about 4%, compared with a yield of 8.55% on November 30 on Emaar’s Islamic bond maturing August 2016.

National Treasury Invites Proposals for Islamic Bond Instruments (SUKUK)

The National Treasury invited on 6th December banking institutions to submit proposals for the provision
of advisory services for the structuring and issuance of a government Islamic bond (“Sukuk”) in
the local and international markets.
The invitation is in line with the National Treasury’s intention to diversify its funding and
investor base.
“There is a great interest in the SUKUK market and this is the first step towards meeting the
growing appetite for government backed Shariah compliant investments” said Lungisa Fuzile,
Director General of the National Treasury.
Interested service providers are expected to submit proposals by close of business (RSA time)
on or before 21st December 2011. Shortlisted bidders will be informed by 20th January 2012.
ENDS

Further Information:

Request for Proposal (RFP):
http://www.treasury.gov.za/comm_media/press/2011/RFP%20-%20TOR%20Islamic...

Annexure to RFP:
http://www.treasury.gov.za/comm_media/press/2011/Annexure%20A%20-%20Suku...

She’ll be apples, mate

One of the WSJ’s blogs (Deal Journal Australia) for November 20 called Islamic finance in Australia a ‘mirage’ on the basis that the Big Four banks are not presenting retail Islamic finance products to the Australian Muslim population (estimated to be around 350,000 people).
The article doesn't present the main point , which is that Australia has a vast amount to offer the world in terms of a wide palette of investment banking activities – fund management, Sukuk issuance, and Shari’ah compliant PPPs.

Confused in Kenya

It seems that although the planned introduction of Sukuk in Kenya is foreseen to expand the opportunities available in the capital market, fund managers stated that its impact will not be significant unless the Sukuk represent tangible assets to allow trading, or are deliberately structured to have a short maturity if they represent receivables of cash.
In Kenya, fund managers are used to trading bonds with commercial banks and will be searching for similar opportunities from Sukuk issues.

Norton Rose advises Indonesia on $1bln Sukuk issuance

Norton Rose has assists its reputation in the Islamic finance field after advising Indonesia on a $1 billion sukuk issuance, as the country attempts to raise its burgeoning currency reserves and targets the fastest economic growth since the Asian financial crisis of 1998.
The issuance, closed on Nov. 21, was build as a sukuk al ijara (sale and lease back) and has a maturity of seven years, with periodic distributions of four per cent per annum.

Albaraka Turk's proposed Sukuk Certificates assigned 'BB' Issue Rating

Standard & Poor's Ratings Services has assigned a 'BB' issue rating on proposed Sukuk certificates to be launched by Bereket Varlik Kiralama Anonim Sirketi (the issuer), a special purpose company (SPC).
The rating on the proposed certificates mainly shows Albaraka Turk's irrevocable undertaking to obtain the assets held by the issuer at the redemption date of the Sukuk at the exercise price which will be equal to the aggregate face value of certificates outstanding.
Albaraka Turk has implied that it is using this sukuk to raise funds for general purposes in accordance with Shari’ah principles.

DRB-HICOM plans RM500mln Sukuk

It appears that RB-Hicom Bhd is planning to sell RM500mil of Islamic bonds to fund working capital and refinance debts.
The sukuk which pay returns from assets that comply with the religion’s ban on interest, was included in an existing RM1.8bil medium-term programme.

Abu Dhabi Islamic Bank up on sale roadshow

It seems that Abu Dhabi Islamic Bank (Adib) rose the most in three months, as the country's second-biggest Sharia-compliant lender continued with its roadshow to sell a $500 million five-year sukuk.
The sale will be oragnized by Citigroup, HSBC Holdings, Standard Chartered, Nomura and National Bank of Abu Dhabi.

Kuveyt Türk introduces Turkey to "Sukuk" market with pioneering lease certificate issuance

Kuveyt Türk Chairman Mohammed Al-Omar, Vice Chairman Abdullah Tivnikli and CEO Ufuk Uyan was present at at the signing ceremony and press conference for the second "Sukuk" issuance that accepted great interest from the Gulf Region and European investors.
Other officials from lead arranging banks also attended: Abu Dhabi Islamic Bank, Commerzbank, HSBC, Liquidity Management House and Standard Chartered Bank.

Large scale sukuks – Kuwait developing legal framework to regulate Islamic finance

It seems that Kuwait's role in the fast-growing global market for sukuks could become larger, if lawmakers expand and administer a more robust legal framework to regulate the issuance of sharia-compliant debt.
However, during this time, Kuwait-based Gulf Investment Corporation (GIC) and Kuveyt Turk participation bank have raised funds in the last months by selling sukuks.

IILM To Issue First Sukuk In 6 Months, Says Zeti

The International Islamic Liquidity Management Corporation (IILM) is assumed to launch its first sukuk in the next six months, as it will contribute to better liquidity management. The statement was given by Bank Negara Malaysia (BNM) Governor Tan Sri Zeti akhtar Aziz.
IILM has the purpose to enhance the availability of liquid Shariah-based Islamic financial market instruments. This is a crucial step in promoting more efficient cross-border liquidity management for Islamic financial institutions to sustain increased cross-border flows.

Al Hilal eyes $500m sukuk in Q1 2012

Al Hilal Bank has chosen three banks to arrange its debut sukuk. The deal is forseen to emerge in the first quarter of 2012.
Standard Chartered, HSBC and National Bank of Abu Dhabi have been assigned by unlisted Al Hilal for a benchmark-sized deal under a bond programme which could be worth up to $3 billion.

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