IslamicFinance.de

Abu Dhabi-based Al Hilal Bank has issued $500 million Perpetual Additional Tier 1 sukuk. The transaction, which was 9 times oversubscribed, drew demand worth $4.5 billion from over 200 investors. The offering follows Al Hilal Bank’s inaugural senior sukuk offering in October 2013 and has been structured to increase the probability of compliance with Basel III. The issuance was priced at par with a profit rate of 5.5 per cent, which represents the lowest coupon achieved by any bank for a USD Tier 1 issuance outside of the United States since 2008. Joint lead managers for the issue included Al Hilal Bank, Abu Dhabi Islamic Bank, Al Rayan Investment, Citigroup, Emirates NBD Capital, HSBC, Sharjah Islamic Bank, National Bank of Abu Dhabi, and Standard Chartered Bank.

Barwa Bank has been appointed as one of five Joint Lead Managers for the UK's £200m debut sovereign sukuk. The Qatari lender takes its place alongside HSBC, Standard Chartered, National Bank of Abu Dhabi and CIMB of Malaysia. Of the five banks involved, Barwa Bank is the only Qatari bank selected and the only wholly Shariah-compliant mandated bank on the panel. Britain's first sovereign sukuk delivers on the government's commitment to become the western hub of Islamic finance. Very strong demand for the sukuk is expected, resulting in a price that delivers good value for money.

Turkish lender Turkiye Finans Katilim Bankasi plans to sell 3 billion ringgit ($933 million) of Islamic bonds in Malaysia. The bank will initially raise 800 million ringgit with a five-year sukuk on June 30 which will have an annual return of six percent. Sukuk under the programme will have a tenure of one to 20 years. Funds raised will go towards general corporate purposes. The so-called sukuk murabaha will be issued through TF Varlik Kiralama, a wholly-owned unit of Turkiye Finans. Malaysia's RAM Ratings has accorded the programme an indicative long-term rating of AA3. HSBC Amanah Malaysia and Standard Chartered Saadiq are joint advisers.

Government-owned Al Hilal Bank PJSC raised $500 million from the sale of perpetual bonds. The Shariah-compliant securities, which don’t mature, will pay a coupon of 5.5 percent. Pricing was tightened from an original guidance of about 6 percent as bids of about $5 billion were received. Al Hilal Bank, Citigroup Inc., Emirates NBD Capital Ltd., HSBC Holdings Plc, National Bank of Abu Dhabi PJSC and Standard Chartered Plc managed Al Hilal’s bond sale. The lender has the fifth-highest investment grade rating at Moody’s Investors Service.

Pakistan's central bank will sell 49.5 billion rupees ($503.8 million) of Islamic bonds, the country's first such issuance in 15 months, with pricing to be set on Wednesday. The sukuk will inject a much-needed liquidity management tool for the domestic Islamic banking industry. The appetite for local currency sukuk has grown with Islamic banks posting double-digit asset growth, but the government has been unable to match demand, constraining the sector's financing and investment capability. The government has not indicated whether it would issue more local currency sukuk this year, although the finance ministry has said it was considering issuing dollar-denominated sukuk.

The investment banking arm of Saudi Arabia’s Al Rajhi Bank has received regulatory approval for its first mutual fund that will invest in sukuk. Interestingly, Al Rajhi has never raised money through a sukuk issue itself. The fund, in the pipeline since 2012, has reportedlly been prompted by a growing number of client inquiries about investing in sukuk. Sukuk issuance in Saudi Arabia rose to the equivalent of $15.2 billion through 20 deals last year, compared to $11.2 billion through 18 deals in 2012. However, a number of the kingdom’s sharia scholars view trading in sukuk as outright trading of debt, which is banned by Islamic principles.

Turkish participation bank Kuveyt Turk has launched a $500m five year sukuk at 340bp over mid-swaps, the tight end of refined guidance, after drawing $3.25bn of orders. Kuveyt Turk gave initial price thoughts of 375bp over mid-swaps on Wednesday, but tightened guidance to a 350bp plus or minus 10bp range on Thursday morning as books passed $2.25bn. Books went subject at 11am in London. The banks arranging the transaction are Citigroup, Emirates NBD, HSBC, Kuwait Finance House and Standard Chartered.

Last week, Britain mandated five banks to arrange a 200 million pound ($336 million) sukuk issue which could be issued in coming weeks, subject to market conditions. Britain's choice of HSBC, Qatar's Barwa Bank, Malaysia's CIMB, National Bank of Abu Dhabi and Standard Chartered as arrangers appeared designed to ensure easy distribution and tight pricing. But the choice was notable for excluding all of Britain's six full-fledged Islamic banks; none was included in the mandate. That could reduce the impact of the issue in developing expertise and depth in Britain's Islamic banking sector. It may also limit British banks' access to the issue.

The Gulf Bond and Sukuk Association (GBSA) held a seminar on Islamic finance in Dakar, Senegal last week at the Making Finance Work for Africa (MFW4A) Partnership Forum. The seminar covered key concepts in Islamic finance as well as current trends in the Sukuk market and the use of Shari’ah-compliant financing as a development tool. GBSA President Michael Grifferty said it has to be ensured that African companies and sovereigns are aware of all financing options available along with the respective risks and rewards.

Saudi Telecom Company has issued a debut Islamic bond worth 2 billion Saudi riyals ($533.3 million) after receiving good demand. The 10-year Islamic bond carries a floating profit rate of 70 basis points over three-month SIBOR and was offered under its newly established 5 billion Saudi riyals private placement sukuk program. The debut Sukuk issuance of STC was almost two times oversubscribed. J.P. Morgan Saudi Arabia, NCB Capital Co. and Standard Chartered Capital Saudi Arabia were joint arrangers of the sukuk program as well as joint managers on the debut issue.

Abu Dhabi government-owned Al Hilal Bank may sell a benchmark-sized Tier 1 capital-boosting sukuk after announcing plans to meet fixed income investors, joining a raft of issuers from the United Arab Emirates taking advantage of benign markets. The unlisted Islamic lender has chosen itself as well as Citigroup , Emirates NBD, HSBC, National Bank of Abu Dhabi and Standard Chartered to arrange roadshows. A benchmark-sized, U.S. dollar-denominated sukuk offer with a perpetual lifespan may follow the investor meetings, subject to market conditions. Al Hilal will meet investors in the Middle East on June 15 before moving to Hong Kong on June 17, followed by Singapore on June 18. After a day in London on June 20, roadshows end in Switzerland on June 23.

The UK government's decision not to choose a local Islamic bank as an arranger for its sukuk is a lost opportunity to promote the homegrown Islamic finance industry, according to Harris Irfan, of European Islamic Investment Bank. Malaysia’s CIMB, Qatar’s Barwa, National Bank of Abu Dhabi, Standard Chartered and HSBC have been chosen to lead the sale.

Turkey's Kuveyt Turk, owned by Kuwait Finance House, mandated banks for a sukuk issue. The bank has mandated KFH Investment as global coordinator and Citi, Emirates NBD Capital, HSBC, KFH Investment and Standard Chartered Bank as joint lead managers and joint bookrunners.

Bangladesh Islamic finance industry is well developed but lacks sharia-compliant instruments such as sukuk. This is limiting further growth of the sector according to a report. Sukuk would be helpfull to diversify the funding sources and could make up for the limited scope of the Islamic money market in Bangladesh. Islamic banks that follow religious principles are now representing 18.9 percent of all Bangladeshi bank deposits.

Dear Reader,

On the occasion of the 10th anniversary of IslamicFinance.de please find at the hyperlink below the relaunch of the newsletter.

http://www.islamicfinance.de/files/20140529%20IslamicFinance%20dot%20de%...

Any new issues will be announced to our registered users of IslamicFinance.de and to the members of the related LinkedIn Group of IslamicFinance.de.

If you wish to register please go to http://www.islamicfinance.de/?q=newsletter/subscriptions or become member of the LinkedIn Group: http://www.linkedin.com/groups?mostRecent=&gid=147616&trk=my_groups-tile...

Enjoy reading! And if you do, please consider sharing the free newsletter with your friends & colleagues by forwarding or subscribing an internal email address to forward it your entire firm.

NB: I appreciate feedback to improve the content and better understand what readers are looking for. Please allow time for reply, which I may not be able to give to all enquiries after sending out the newsletter.

All the best,

Michael Saleh Gassner

RAM Ratings has assigned AA3/Stable/P1 financial institution ratings to Turkiye Finans Katilim Bankasi AS (the Group). RAM moreover assigned an AA3/Stable rating to the proposed RM3.0 billion Sukuk Murabahah MTN Programme to be issued by the Group's wholly owned asset leasing subsidiary, TF Varlik Kiralama AS. The assigned ratings reflect a high likelihood of extraordinary support from the Group's major shareholder, The National Commercial Bank (NCB). Turkiye Finans enjoys sound earnings which support its capital position. Although its asset-quality indicators are healthy, they may weaken amid Turkey's more challenging economic and political backdrops. On the other hand, Turkiye Finans' ratings are constrained by its limited domestic franchise and relatively weak funding position.

Islamic finance has been one of the fastest-growing sectors in global finance but the industry has yet to shake off perceptions about high costs and complexity that are holding back some issuers. Britain, Luxembourg, Hong Kong and South Africa all are keen to make maiden sukuk issues, to diversify their funding sources and tap liquidity sources. However, these and other plans have been delayed by factors including double-taxation on some sukuk structures and a difficulty in identifying assets to underpin the transactions. Increased clarity on sukuk structures has helped: the design and approval process has become generic. Moreover, some jurisdictions have enacted legislation in the past few years to remove double or even triple tax duties on sukuk.

Two key growth areas for international capital markets are set come together in the first green and socially responsible sukuk offerings, writes Dan Alderson. The World Bank is endorsing the product through involvement in two new projects due this year. The Washington supranational’s ambition of issuing its own dollar sukuk is hampered by its mostly conventional asset base. But its UK-based affiliate the International Finance Facility for Immunisation (IFFIm) is looking to do a debut sukuk to fund vaccinations in 53 of the world’s poorest countries.

Saudi Arabia's Dar Al Arkan Real Estate Development Co raised $400 million through an Islamic bond, with strong demand for the paper helping to reduce the cost at which it borrowed. The developer attracted a final order book of more than $1 billion for its five year sukuk. Final pricing came at a profit rate of 6.5 percent. This was tighter than the 6.75 percent earmarked earlier on Wednesday and well inside the high-6s percent given as initial pricing thoughts on Tuesday. Alkhair Capital, Deutsche Bank , Emirates NBD and Goldman Sachs were coordinators and bookrunners of the deal. Abu Dhabi-based Al Hilal Bank, as well as Qatari trio Al Rayan Investment, Barwa Bank and QInvest were also bookrunners.

Sukuk sales by Malaysian lenders seeking to comply with Basel III rules are drawing strong demand, prompting arrangers to predict a rush of offers. CIMB Islamic Bank Bhd has reportedly submitted a proposal to the Securities Commission for a RM5 billion (S$1.9 billion) programme. Moreover, Public Islamic Bank Bhd received approval for a similar-sized programme, an April 23 stock exchange filing shows. AmIslamic Bank Bhd, Maybank Islamic Bank Bhd and RHB Islamic Bank Bhd have sold a combined RM2.2 billion of Basel III sukuk since late February.