IslamicFinance.de

Saudi Electricity Co plans to issue Islamic bonds denominated in both riyals and dollars in coming months and has reportedly selected banks to arrange the offers. The monopoly utility has large fund-raising needs as it looks to expand generation capacity to keep up with the kingdom's rapidly growing power demand. SEC has chosen the investment banking arm of Banque Saudi Fransi and HSBC's Saudi Arabian unit to arrange the riyal-denominated sukuk. This transaction is expected to launch as early as Thursday. HSBC will also be involved as an arranger of the dollar-denominated sukuk, along with Deutsche Bank and JP Morgan Chase. This sale is expected in early 2014.

The first sukuk proposed by Osborne will only be valued at £200m, but it would make Britain the first non-Islamic country in the world to issue sovereign sukuk. However, ensuring that the sukuk are watertight in their compliance with sharia will be the acid test for Osborne. If they’re not, they are rendered pointless and a huge waste of time and money. If Osborne’s sukuk have a successful debut, it will herald a greater level of fiscal openness and consensus between the Islamic world and Britain. But it is highly unlikely this policy will make a difference to the life of the average British Muslim, and issuing a few culturally-catered bonds will not even begin to address the rampant inequality and instability of a British economy.

Dubai-based GEMS Education has set initial pricing thoughts of an 11.75-12.00 per cent profit rate for its planned debut sale of hybrid Islamic bonds. The company, which employs about 11,000 staff and operates around 100 private schools across the Gulf region, has hired Morgan Stanley Inc, Credit Suisse and Abu Dhabi Islamic Bank (ADIB) to arrange the sale. The sukuk sale will use a mudaraba structure and will be callable after five years. No details on the planned size of the offering was provided.

Indonesia's finance ministry did not receive any winning bids for all offered sharia bonds at Tuesday's auction, the debt office at the finance ministry said. The country offered project-based sukuk with maturities of 7-years, 24-years and 30-years with an indicative target of 1 trillion rupiah. Total bids were 366.3 billion rupiah ($31.7 million).

Dear Reader,

Frequently I am being asked about advice on topics for student's thesis. More often than I actually would have ideas at hand.

Now, what I would suggest is two things:

1) In general: Write about a topic useful for Islamic banking rather than the 1001 work about the core principles. Responsible investment, impact investing and the like is good to study and then learn from each other.

2) Specifically, my idea of the idea: Sukuk is a new market. A concern in the first years was that nobody knows how a default would be turning out. Now as we have a small number of default and near default cases there is a possibility of analyzing the outcomes and derive conclusions. A topic with real practical relevance.

All the best,

Michael Saleh Gassner

Turkish lender Türkiye Finans plans to issue both lira and foreign currency-denominated sukuk in 2014, according to Chief Executive Derya Gürerk. The lender, majority owned by Saudi Arabia’s National Commercial Bank, issued a $500 million sukuk earlier this year. The move reflects Turkey’s growing Islamic finance industry as the government promotes a wider range of Islamic finance products. The country now has 50 banks, four of which are Islamic: Al Baraka Turk, Bank Asya, Türkiye Finans and Kuveyt Türk, 62 percent owned by Kuwait Finance House. These banks have seen their assets grow six-fold over the last decade as their combined branch network has more than tripled.

Omani real estate developer Tilal Development Co has sold the country's first Islamic bond, a 50 million rial ($130 million) sukuk. Tilal's five-year sukuk, offering a profit rate of 5 percent and based on an ijara structure was privately placed with investors, arranger Al Madina Investment said. About 95 percent of the sukuk, rated BBB+ by Cyprus-based Capital Intelligence, was placed with local investors including pension firms and banks. Tilal, 40 percent-owned by sovereign wealth fund Qatar Investment Authority, will use proceeds from its sukuk to expand the Tilal Complex in Muscat, a flagship project which includes the Muscat Grand Mall as well as residential and office space.

The Islamic Development Bank (IDB) has announced that it intends to list Dh37 billion sukuk programme on Nasdaq Dubai. The move represents a momentous addition to the constant successes of ‘Dubai the Capital of Islamic Economy’ initiative. Dr Ahmad Mohamed Ali Al Madani, president of the IDB, said that Dubai’s exchange and regulatory architecture together with its commitment to providing Islamic finance solutions of high quality make it a natural home for IDB's securities. It is noteworthy that Dubai capital markets have successfully attracted sukuk issues of Dh46 billion since the launch of ‘Dubai, the global sukuk centre’, and this number is expected to reach Dh60 billion by year end.

Emirates Islamic Bank (EIB) listed two sukuk, each with a nominal value of 500 million dollars, a total of 1 billion dollars (AED 3.67 billion), on NASDAQ Dubai. The issuances raised the total value of Sukuk listed on Dubai’s exchanges to 12.08 billion dollars (AED 44.4 billion), the third largest amount in the world. The listing of EIB’s Sukuk on NASDAQ Dubai took place in September. The yield on the HSBC/ NASDAQ Dubai US Dollar NASDAQ Dubai-Listed Sukuk Index has fallen to 3.76% from 4.5% at the beginning of September, implying greater demand for the securities in the index.

David Cameron, the British prime minister, announced plans to issue sovereign sukuk as early as next year at the ninth annual World Islamic Economic Forum in London on October 29th. The convention marks the first time the event has been held outside the Muslim world. That is a testament to the rising global clout of Islamic finance. The Gulf states have been at the forefront of the boom, other countries like Turkey are emulating the Gulf model. However, the prospects in the wider Middle East, e.g. Egypt and Lybia, are less clear. Despite Islamic finance’s being the toast of the town in the City of London this week, the struggle to make it work in the heart of the Muslim world continues.

Dear Reader,

IslamicFinance.de is still edited by myself, Michael Saleh Gassner. In the same time the website became part of the family's publishing house, Al Kitab.

Myself I moved to Geneva for professional reasons, working as Islamic private banker. IslamicFinance.de remains to be a private passion.

Best regards,

Michael Gassner

EIIB-Rasmala, a venture between London-based European Islamic Investment Bank and Dubai's Rasmala Group, plans to widen its range of Islamic investment products with the hope of doubling assets under management over the next two years. The firm, which manages over $1 billion in assets, sees growing mid-market opportunities for its Islamic asset management and investment banking business lines, chief executive Zulfi Hydari said. By mid-market, the firm means medium-sized customers which may no longer be served by big investment banks. In investment banking, the firm is focused on arranging Islamic bonds, with deal sizes between $75 million to $150 million. Earlier this month, the firm already arranged the first tranche of a $100 million sukuk programme from FWU Group.

Aeon Credit Service, which has been deliberating on a cash-raising exercise to beef up its capital adequacy ratio (CAR), is said to have chosen the route for a perpetual notes or sukuk issue instead of equity. Analysts are expecting the proposed perpetual notes or sukuk, which is subject to the authority's approval, to be announced soon given the non-bank financial institution's 16.3% CAR as of Aug 20, 2013 is nearing Bank Negara Malaysia's minimum requirement of 16%. Aeon Credit could raise some RM190 million from the proposed exercise to increase its CAR to 22% based on its shareholders funds. No significant dilution on Aeon Credit's earnings per share is expected. Aeon Credit's D/E ratio surged to 5.67 times as of Aug 20, 2013 from 4.6 times as of May 20, 2013.

The Islamic Corporation for the Development of the Private Sector (ICD), a member of the Islamic Development Bank Group (IDB), and the government of Senegal and have announced the African state’s plan to relaunch a XOF 100 billion ($200 million) sukuk project next year. Amadou Ba, Senegal’s minister of economy and finance, has reaffirmed the interest of his government of Senegal to diversify its financing instruments. This project is the beginning of an ambitious program which could lead to the financing of innovative infrastructure and energy projects through sukuk issuances. This project is the first of its kind in the West African Economic and Monetary Union (WAEMU) and aims to promote Islamic finance as an alternative instrument to finance the economies of the member states of the union.

A report issued by KFH-Research revealed that the global sukuk market recovered during the month of September last year to reach in its new issuances USD 7.8 billion - a 33pct growth. Malaysia still accounts for the largest share of the issuance where the Malaysian Ringgit came in first place in terms of the currencies that sukuk issued through. No sukuk were issued of the U.S. dollar in September. The most notable issuance during the month was by Saudi dairy and food firm Almarai Co. which completed the sale of a SAR1.7 billion (USD 453.1 million). Sovereign issuers made up 84.9pct of the primary market in September, while government related entities accounted for 4.0pct and corporates took the remaining 11.1pct. A total of 47 sukuk were issued in September vs. 55 sukuk in August and 66 in July.

The Nigerian State of Osun has completed N11.4bn sukuk bond issue. The sukuk bond was issued in accordance with enactment of the Osun State Bonds, Notes and Other Securities Law 2012 and setting up the Osun Sukuk Company Plc. Though Islamic in nomenclature, the sukuk bond was a conventional bond and coordinated by the regular investors in the nation’s capital and money market. The N14. 4 bn sukuk (14. 75 per cent) fixed return tranche 2 has 42 investors with Lotus Capital Limited as the leading issuing house and Augusto and co, one of Nigeria’s rating agencies, as the rating agent. Out of the 42 investors, only one of them (Jaiz Bank) is Islamic and the name sukuk is just a nomenclature, saying that the investors are regular Nigerians.

The Islamic Development Bank (IDB) is considering setting up an Islamic bond issuance programme in Dubai. It would be the IDB's first sukuk programme in a Middle Eastern country. While discussions are at an early stage, the IDB has seen growing demand for its sukuk and already plans to expand its main London-listed programme to $10 billion from the current $6.5 billion.The IDB sukuk could offer a much-needed boost to trading volumes and encourage issuers from outside the emirate to choose Dubai as their listing venue. Support for sukuk issuance is part of a broad cooperation agreement signed in July between the IDB and the government of Dubai.

HSBC and NCB Capital announced the completion of the largest ever government guaranteed Sukuk in Saudi Arabia for the General Authority of Civil Aviation (GACA). Totaling a size of SAR 15.211 billion (US$4.056 billion), the Sukuk achieved a profit rate of 3.21% p.a. HSBC and NCB Capital acted as Joint Lead Managers and Bookrunners of the Sukuk. Additionally, HSBC acted as the Sukuk Coordinator, Sole Shari'ah Coordinator, Sukuk Holders' Agent, and Payment Administration Agent. Standard Chartered Saudi Arabia was Co-Lead Manager for the Issuance. The deal was 1.9 times oversubscribed with strong demand from a wide range of investors including banks, sovereign funds, pension agencies, insurance companies and corporates. Additionally, this issuance is also approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero% risk weighting for capital adequacy calculation purpose.

Al Hilal Bank (AHB), rated A1by Moody's and A+ by Fitch, priced its highly successful debut $500 million Sukuk issued at par with 3.267 per cent semi-annual profit rate with a spread of 170 bps over the US Dollar at five-year mid swaps (MS). AHB, Citigroup, HSBC, NBAD and Standard Chartered Bank acted as Joint-Lead Managers and Joint Bookrunners, with BIBD, Maybank IB, SIB and UNB acting as co-Managers. The geographical distribution of the issue was as follows: 37 per cent to the UAE, 21 per cent to the rest of the Middle East, 22 per cent to Asia, 17 per cent to Europe, and 3 per cent to US offshore investors. The Trust Certificates will be listed on the Irish Stock Exchange under AHB’s $2.5 billion Trust Certificate Programme.

HSBC and NCB Capital announced the completion of the largest ever government guaranteed sukuk in Saudi Arabia for the General Authority of Civil Aviation (GACA). Totaling SR15.211 billion ($4.056 billion), the sukuk achieved a profit rate of 3.21 percent p.a. HSBC and NCB Capital acted as joint lead managers and bookrunners of the sukuk. Additionally, HSBC acted as the sukuk coordinator, sole Shariah coordinator, and agent of sukuk holders and payment administration. Standard Chartered Saudi Arabia was co-lead manager for the issuance. The deal was 1.9 times oversubscribed with strong demand from a wide range of investors. Additionally, this issuance is also approved by the Saudi Arabian Monetary Agency (SAMA) to be eligible for repo arrangements and has also been assigned zero percent risk weighting for capital adequacy calculation purpose.