IslamicFinance.de

Abu Dhabi government-owned Al Hilal Bank priced its debut $500m five-year sukuk issue, as Gulf issuers flood back to the market to take advantage of conducive market conditions. The transaction priced at par with a profit rate of 3.267 percent and a spread of 170 basis points over midswaps. The spread had tightened significantly from the initial price thoughts, released on Sunday, which had indicated a spread of 190 bps over the benchmark.

Seeking to diversify its financial industry after a banking crisis, oil-rich Kazakhstan is drawing on Arab and Malaysian investment in an effort to build an Islamic finance industry among its 13mn Muslims. Its success may depend on the fate of pioneer investors and the commitment of its secular government to clear the way for a long-awaited sovereign issue of sukuk, or Islamic bonds, which could prompt other issuers to follow. Al Hilal, owned by the government of Abu Dhabi, was the first bank to respond when Kazakhstan passed new laws last year to allow an Islamic finance industry. The bank opened its Kazakh offices in March 2010. Though modern Islamic finance began three decades ago, its major principles, such as a prohibition on paying interest, would have been familiar to Muslim traders on the medieval Silk Road through Kazakhstan and Central Asia. Investors, though, are cautious. The financial crisis humbled the once-proud Kazakh banking sector; international creditors were forced to write off billions of dollars of debt in a restructuring process that followed local bank defaults.