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Saudi Binladin Group has begun marketing a 364-day sukuk issue to local investors in the kingdom which could raise up to one billion riyals ($265 million) for the construction firm. The transaction is being managed by BNP Paribas' Saudi unit and the investment banking arm of Gulf International Bank. Funds from the deal will be used to finance costs related to its work at the King Abdulaziz International Airport in Jeddah. The last time Binladin Group was in the bond market was in July 2013, when it sold a 1bn riyal 364-day sukuk, which carried a profit rate of 2.5 per cent. That transaction was arranged by the same two banks appointed for the current issue.

Sukuk issuance by governments around the world is expanding, helping to bring Islamic finance into the mainstream. However, the sovereign issues are not encouraging sukuk sales by companies. Last year saw debut sukuk issues by the governments of Britain, Hong Kong, Luxembourg, Senegal and South Africa. Hong Kong tapped the market for a second time this week with a $1 billion deal. Since the five debut sovereign sales, no company has issued sukuk in those five economies. As a result, sovereign and quasi-sovereign issuers accounted for 85 percent of the $113.9 billion of sukuk deals done globally in 2014, and that proportion shows no sign of changing.

Abu Dhabi Islamic Bank will ask shareholders for permission to expand its existing Tier 1 sukuk issue, originally sold in 2012, by $2 billion to $3 billion, it said in a bourse filing on Thursday. The increase is subject to regulatory approval, the Abu Dhabi lender said. The Abu Dhabi lender will also ask shareholders to vote to increase the bank's capital by 168 million dirhams ($45.74 million) through a rights issue.

Hong Kong recently issued $1 billion five-year sukuk. Pricing was aggressive, with the $1 billion sukuk pricing at Treasuries plus 35bp. The sharia-compliant note had a profit rate of 1.894%. However, the leads took comfort in the fact that there were solid anchor orders in place before launching the deal. Roadshows were held in key Islamic centres including Kuala Lumpur, Saudi Arabia, the Emirates and London and much of those orders came from reverse enquiries from roadshows. The sukuk gathered an orderbook of $2 billion from 49 accounts. Given that it was an ultra-low yielding AAA product, banks treasuries took close to three quarters of the deal. Central banks and sovereign wealth funds took close to a quarter of the deal.

The Thomson Reuters Global Sukuk Index is at 118.48549 points, down from 118.50812 at the end of last month but up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 117.40807 against 117.54139 at end-April and 113.69014 at end-2014. Sukuk in the pipeline include: Indonesian leasing company Adira Dinamika Multi Finance aims to sell bonds worth 2.5 trillion rupiah ($190 million), split into a 2 trillion rupiah conventional portion and a 500 billion rupiah sukuk portion. Oman plans to sell its first sovereign Islamic bond, an issue of 200 million rials ($520 million) of sukuk, through a private placement and will launch subscriptions soon. Saudi British Bank plans a riyal-denominated sukuk issue.

Hong Kong Government has successfully sold its second Islamic sukuk bond to raise US$1 billion in its latest effort to promote Islamic finance in the city. The Hong Kong Monetary Authority, which handled the issue on behalf of the government, said on Thursday that the issue was popular and it received US$2 billion in orders from 49 global institutional investors including central banks and sovereign funds among others. The orders were double its US$1 billion issue size. The five-year bond was priced at 1.894 per cent, which is lower than last year’s issue and is 35 basis points over 5-year US Treasuries. The new government sukuk will be listed on June 3 in the stock exchange of Hong Kong, Nasdaq Dubai and Bursa Malaysia.

Abu Dhabi Islamic Bank will ask shareholders for permission to expand its existing Tier 1 sukuk programme to $3 billion from $2 billion, it said in a bourse filing on Thursday. The increase is subject to regulatory approval, the Abu Dhabi lender said. It will also ask shareholders to vote to increase the bank's capital by 504 million dirhams ($137.2 million) through a rights issue.

Hong Kong sold US$1 billion (RM3.6 billion) of Islamic bonds in its second sukuk issue since the city’s debut in 2014. The five-year debt was priced at 1.894 per cent, with orders amounting to US$2 billion, according to a government statement. The city sold the same amount and tenor in September at 2.005 per cent, which drew bids for US$4.7 billion. Those notes last yielded 2 per cent. The city sold its latest bonds at a spread of 35 basis points above similar-maturity US Treasuries. That compares with 23 basis points for its debut offering. Standard & Poor’s assigned a preliminary AAA credit rating to the deb, the same as the government.

King Salman has reorganized his cabinet, removed princes from government roles, merged ministries and realigned succession since ascending to the throne in January. As a consequence, Saudi companies have yet to market a single security in 2015, making it the country’s quietest start for Islamic sales in nine year. The companies need some stability before they start looking at sukuk-type issuance. Saudi Arabia is pursuing a $130 billion spending plan to diversify its economy away from oil, and has vowed to invest in major infrastructure projects. King Salman’s changes will impact many areas, especially financial markets.

Indonesian airline Garuda Indonesia has mandated a total of 15 banks to arrange its first dollar outing, which will be executed in sukuk format. The company has chosen National Bank of Abu Dhabi (NBAD) as sole global co-ordinator. Dubai Islamic Bank and NBAD are working as joint structuring banks.

Short term Sukuk rated A-1 by Standard and Poor’s Rating Services (S&P’s) have been issued by the International Islamic Liquidity Management (IILM). IILM order book picks up from previous auction for A-1 rated (S&P) Sukuk. $490m issued from orders received of $1.288 Billion from 10 Bids. IILM sells its Sukuk through its primary dealers, who consist of: Abu Dhabi Islamic Bank, AlBaraka Turk, CIMB Islamic Bank Bhd, Luxembourg's KBL Private Bankers, Kuwait Finance House, Maybank Islamic Bhd, National Bank of Abu Dhabi, Qatar National Bank, Standard Chartered Bank and Barwa Bank.

Indonesia completed its largest-ever global sukuk sale, selling US$2 billion of Islamic bonds at the lowest yield in three years. The Finance Ministry issued the notes at 4.325 per cent, lower than the initial 4.55 per cent indicated, Robert Pakpahan, director general at the budget financing and risk management office, said in a text message on Friday. That compares with the 4.35 per cent rate paid on similar Shariah-compliant debt sold last year and the record-low 3.3 per cent on 10-year sukuk issued in 2012.

Fitch Ratings has assigned Indonesia's proposed sovereign global certificates (sukuk) issued through Perusahaan Penerbit SBSN Indonesia III (PPSI-III) an expected 'BBB-(EXP)' rating. The expected rating is in line with Indonesia's Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BBB-', which has a Stable Outlook. The rating reflects Fitch's view that cash flows supporting payment on the sukuk will constitute direct, unconditional, unsecured and general obligations of Indonesia, ranking equally with Indonesia's unsecured and unsubordinated marketable external debt. The rating will be sensitive to any changes in Indonesia's Long-Term Foreign Currency IDR.

Dubai Islamic Bank (DIB) has picked six banks to arrange fixed income investor meetings from Thursday for a potential benchmark size, U.S. dollar-denominated senior sukuk issue, a document from lead arrangers showed. DIB has mandated First Gulf Bank, HSBC, Maybank, National Bank of Abu Dhabi, Standard Chartered Bank and itself to arrange the meetings in Asia and Europe. Meetings will be held in Kuala Lumpur on Thursday and Singapore on Friday before concluding in London on Tuesday, the document showed. The offer will be under DIB's $2.5 billion sukuk programme, subject to market conditions.

Malaysia's successful pricing of the US$1.5 billion (RM5.4 billion) global sukuk has strengthened the country's position as an international centre for Islamic finance, says Prime Minister Datuk Seri Najib Razak. Najib, who is also finance minister, said the 30-year tranche was the government's inaugural sukuk issuance, which is also the longest tenured sukuk. The issuance comprises US$1 billion of 10-year and US$500 million of 30-year benchmark Trust Certificates (Sukuk) for a total size of US$1.5 billion. Najib said the deal was oversubscribed, attracting an aggregate interest of US$9 billion from a combined investor base of more than 450 accounts.

Qatar Islamic Bank (QIB) expects to issue a Tier 1 capital-boosting bond between this quarter and the third quarter, the bank’s chief financial officer Gourang Hemani said. The Doha-listed lender in February received shareholder approval to issue up to 5 billion Qatari riyals (Dh5.04bn) to increase its Tier 1 or core capital in line with Basel III banking standards. The bond will have a perpetual tenor. It is going to be a private placement, most likely within Qatar. QIB’s net profit rose 19 per cent to 400 million riyals in the first quarter of this year, compared to a year earlier. Total income grew 13 per cent in the first quarter to 950m riyals, compared with the year-earlier period.

The Thomson Reuters Global Sukuk Index is at 118.28847 points, down from 118.50812 at the end of last month but up from 115.79726 at the end of last year. The Thomson Reuters Investment Grade Sukuk Index is at 117.13915 against 117.54139 at end-April and 113.69014 at end-2014. Sukuk in the pipeline include: The government of Hong Kong hired four banks for a possible offer of U.S. dollar Reg S-only sukuk. Oman plans to sell its first sovereign Islamic bond, an issue of 200 million rials ($520 million) of sukuk. Malaysia's Aeon Credit Service said in mid-May it planned to raise 1 billion ringgit ($276.6 million) via sukuk murabaha for working capital, repayment of debt and financing for customers.

Malaysia’s state-owned sovereign wealth fund is about to test appetite for the nation’s first socially responsible Islamic bonds and plans to issue such debt annually. Khazanah Nasional Bhd will start marketing as much as RM150 million (US$42 million) of the seven-year sukuk today, Chief Financial Officer Mohd Izani Ghani said. The offering will fund 20 schools in Malaysia, he said, adding that future sale options may include healthcare and affordable housing. The SRI sukuk will pay fixed, periodical profit rates throughout the bond’s term, with principal repayments linked to the individual school’s performance in terms of the quality of education provided, said Izani. Before maturity, the profit rate will be adjusted lower, he said. The “step-down yield” could be 100 basis points below the coupon rate.

Khazanah Nasional Bhd. will start marketing as much as 150 million ringgit ($42 million) of the seven-year sukuk on Monday, Chief Financial Officer Mohd Izani Ghani said. The offering will fund 20 schools in Malaysia, he said, adding that future sale options may include healthcare and affordable housing. While it would be a challenge convincing investors to buy because the concept is new, the offering will be a catalyst for further issuance in an area that’s still nascent. The SRI sukuk will pay fixed, periodical profit rates throughout the bond’s term, with principal repayments linked to the individual school’s performance in terms of the quality of education provided. Before maturity, the profit rate will be adjusted lower, he said.

The Jeddah-based Islamic Development Bank has no immediate plans to issue short-term sukuk (Islamic bonds), leaving it to domestic and regional issuers to meet growing demand for liquidity management tools in the sector. Last year, the IDB said it aimed to issue its first short-term sukuk in 2014, adding to wider efforts to develop high-quality liquid assets (HQLAs) for Islamic banks to use, but at this stage such a programme is not planned. In the meantime, domestic regulators including Bahrain and the United Arab Emirates have expanded their Islamic liquidity tools in recent months. But there are concerns that such tools could be insufficient in times of market stress, when they are needed most.