IslamicFinance.de

Turkish Islamic lender Bank Asya plans to issue at least 125 million lira ($62 million) of lira-denominated sukuk by the end of the year, according to deputy general manager Feyzullah Egriboyun. Bank Asya applied to the Capital Markets Board to issue sukuk worth up to 1 billion lira in July.

Bahraini lender Al Baraka Bank's Turkish unit plans to issue more than $200 million of sukuk, in the last quarter of this year or early 2014, according to executive vice president Ayhan Keser. Keser said the timing would depend on market conditions and the maturity of the sukuk was likely to be 5 years.

Bank Negara has rejected BIMB Holdings’ proposed move to issue sukuk using Bank Islam Malaysia’s shares as security for the debt, but has allowed the former to acquire the remaining 49% stake in the latter. The central bank has then requested to source and notify the bank on suitable alternative assets as security for the proposed sukuk. An analyst felt the rejection by the central bank would not deter or derail BIMB’s plans to acquire Bank Islam, although it may slow down the purchase process. Last month, BIMB had announced the proposed acquisition of the remaining stake in Bank Islam – 30.5% from the Dubai Financial Group and 18.5% from Lembaga Tabung Haji – for a total cash consideration of US$884.6mil (RM2.87bil). This was to be financed via a two-for-five rights issue of 426.7 million new shares, and a sukuk issuance of up to RM1.47bil.

The $490 million, three-month Sukuk, issued by the International Islamic Liquidity Management Corp (IILM), was auctioned to seven primary dealers from Asia, theMiddle East and Europe. However, this will only be a major breakthrough for Islamic finance if IILM sukuk are actively traded by Islamic banks, rather than held to maturity. It is not clear whether the existing primary dealer network - which includes only two purely Islamic financial institutions - is broad enough to engineer trade in IILM sukuk across major markets. The prevalence of conventional banks in the dealer group suggests the IILM may have decided to choose the largest possible primary dealers in order to maximise distribution of the sukuk. But it also raises the possibility that the instrument could be bought by conventional institutions rather than the Islamic banks which most need it.

The Islamic Development Bank (IDB) will boost its sukuk programme by more than 50 per cent by year-end as demand for financing from member countries, including Turkey and Morocco, grows. IDB aims to raise its medium-term note programme to US$10 billion (RM33 billion) from US$6.5 billion, so that it is ready to tap the market at any time. The increase will be the largest by value since the programme was started in 2005 by the almost 40-year-old bank.

Saudi British Bank (SABB), an affiliate of HSBC Holdings and the kingdom's third-largest listed lender by market value, is reportedly aiming to sell a Tier 2 capital-boosting Islamic bond before the end of the year. HSBC is advising SABB on the potential riyal-denominated transaction.

Indonesia’s need for dollars to defend the plunging rupiah will see the country pay the highest yield since 2009 when it sells global sukuk. The nation will offer around $1 billion of Shariah- compliant bonds after investor meetings. A yield of between 6.5 percent and 7 percent for 10-year securities is expected. Bank Indonesia announced measures aimed at increasing the supply of foreign-exchange on Aug. 23 to stem an 8.5 percent plunge in the rupiah this quarter. Moreover, the country raised its overall sales target to 231.8 trillion rupiah ($21 billion), from 180.4 trillion rupiah, as it set its budget deficit goal at 2.38 percent of gross domestic product. Besides, more shipments of unprocessed minerals will be allowed in order to narrow the current-account deficit.

The Malaysia-based International Islamic Liquidity Management Corp (IILM) has issued its USD 490 million debut sukuk. The three-month Islamic bonds, denominated in US dollars, were fully subscribed. The IILM sukuk received a high A-1 credit rating from Standard & Poor’s, and the IILM has said it plans to increase its issuance eventually to as much as USD 3 billion. The sukuk, priced at 30 basis points over the London Interbank Offered Rate, was auctioned off to seven institutions from around the world. These primary dealers will now be responsible for selling the sukuk on to other Islamic banks and institutions in an effort to create an active market in the instruments.

The Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance is a new piece of legislation, introduced in Hong Kong. This law, which puts the taxation of sukuk on a level footing with conventional bonds in Hong Kong, marks a significant effort by the Hong Kong Government to promote the development of a sukuk market in the territory. However, success in developing a market for Islamic finance is not just about regulation and tax. Most importantly, it is about ethics, in the form of Shariah compliance. Islamic finance continues to be dominated by banking. Insurance (takaful) has received much less attention and its development reflects a degree of neglect. The problem lies in the widespread use of takaful and retakaful contracts which are nothing more than conventional insurance and reinsurance contracts. A strong ethical framework needs to be created and enforced within which Islamic finance can thrive.

The stock of outstanding GCC fixed income instruments rose to $239.8 billion in the first six months of this year. The largest debtors are the Qatari public sector (23 per cent), the UAE financial sector (16 per cent) and the UAE public sector (15 per cent). Among non-financial private issuers, the Saudi sector is the most active with 10 per cent of all outstanding GCC debt followed closely by the UAE. Issuance was up 13.2 per cent compared to a year ago, with $30.1 billion worth of debt securities issued over the last six months. The UAE, Saudi Arabia, and Qatar accounted for 82 per cent of the issuance in 2013. The private sector has been increasingly outperforming the public sector over the last twelve months. The average maturity of outstanding GCC debt securities remained steady at 5.8 years at the end of the first half of 2013.

Laws, legislative rules and regulations governing Islamic bonds will be implemented as planned, as part of government efforts to revive the economy, according to Egyptian Finance Minister Ahmed Galal. However, he refused to say who would assume the role of Chairman of the Islamic Bonds Division within the ministry, after the sacking of previous chairman Ahmed Al-Nagar. Ahmed Al-Gabali, Advisor to the Minister on Islamic Bonds, is reportedly interested in the position but will need to be made aware of the nature of the job before applying. Galal previously published a decision to dispose of a number of legal advisors and chairmen of financial units due to their affiliation with the Muslim Brotherhood, among them Ahmed Al-Nagar, previous Chairman of the Ministry of Finance’s Islamic Bonds División.

The global sukuk market is poised for a record-breaking year, according to Standard Chartered Saadiq's chief executive officer Wasim Saufi. Standard Chartered expects demand for Islamic bonds to help push sales to levels unseen before this year although Islamic bond sales fell by as much as 11 per cent for the first six months of the year. Wasim said several issuances are in the pipeline, including a few being evaluated for dollar sukuk to be issued by Malaysian companies. One that is in the pipeline is Khazanah Nasional’s sale of US$1 billion of convertible Islamic bonds. Ernst & Young LLP in a December 2012 report predicted that the global demand for sukuk will reach US$950 billion by 2017. According to Bloomberg-compiled data, global sukuk sales hit US$18.8 billion in the first half of the year.

Fitch Ratings has assigned Salam III Limited's USD100m insurance-linked Sukuk programme an expected rating of 'BBB-(EXP)'. Fitch has also assigned a rating of 'BBB-(EXP)' to the proposed first USD20m tranche under the programme. ATLANTICLUX Lebensversicherung S.A. (ATL) acts as ultimate obligor in the programme, which is sponsored by ATL's parent company FWU AG. The Sukuk programme's rating is the same as ATL's Long-term Issuer Default Rating (IDR). Each tranche of the Salam III Sukuk programme will have its final payment date five years after its issuance. The first tranche of USD20m is currently planned to be issued in September 2013. Proceeds from the programme will be used to finance upfront acquisition costs of new business. The Sukuk programme has no material impact on ATL's credit fundamentals such as financial leverage or capitalisation.

Almost half of the 150 million Singapore dollar ($118 million) sukuk issued by Swiber went to investors from Brunei, helping Swiber clinch pricing that was more competitive than conventional debt. Swiber's five-year deal priced last week to yield 6.5 percent and was backed by strong anchor demand from high-quality institutional investors before books opened. About half of the bonds were allocated to Islamic institutions. The biggest chunk, 46.3 percent, went to Brunei, while Malaysia took 10.0 percent and Singapore 43.7 percent. Institutional buyers accounted for a huge 96.5 percent share of the deal. Maybank Kim Eng was sole lead arranger and global coordinator for the programme. Proceeds from the issue will be used to refinance debt and support capital expenditure.

Malaysia-based International Islamic Liquidity Management Corp (IILM) will issue its long-awaited sukuk programme worth $490 million (RM1.6 million) this month, offering tenors of three months. The dollar-denominated sukuk programme, rated "A-1" by S&P, is backed by sovereign assets from member countries and will carry maturities of up to one year. IILM delayed its maiden issue several times and replaced its chief executive in October last year. It plans to raise the programme to as much as US$3 billion, aided by a multi-jurisdictional network of primary dealers that will ensure a secondary market, which includes Albaraka Turk and Standard Chartered as primary dealers.

Saudi Arabian dairy producer Almarai Co. has chosen four banks to arrange the sale of a hybrid sukuk. The firm has mandated the investment banking arm of Banque Saudi Fransi, BNP Paribas, HSBC's Saudi Arabian unit and Standard Chartered to arrange the transaction. The offering, which is not imminent, is likely to be denominated in Saudi riyals, although the company could opt to issue in dollars instead. Almarai's Chief Financial Officer, Paul Louis Gay, told reporters in May it could opt to issue a hybrid Islamic bond in the next 12 months to help fund its ambitious growth plans, with a target amount of around $500 million. However, Gay said in May it was looking to raise the cash from international investors, rather than the local debt market. Earlier this month, Almarai posted a 4.9 percent year-on-year rise in second-quarter net profit on the back of growth in its core business.

The NCA approved a bill that will legalize Islamic bonds or Sukuk on last Wednesday. The voting came out with a smashing majority of 102 votes against 3. The new law is likely to stimulate investments coming from the rich region of the Gulf and and close in the gap of the budget deficit. Tunisia's budget deficit is likely to raise to $3.2 billion for the incumbent financial year.

Sukuk issuance fell in pre-Ramadan June and growth momentum is expected to ease in the coming months after yields surged to a 25-month high, says the Malaysia Islamic Financial Centre (MIFC). The primary sukuk market this year has outpaced the previous year every month since January 2013, except June, which saw a noticeable slow down, says MIFC's second-quarter report. Momentum is expected ease as investors weigh US monetary policies in the coming months.

Hong Kong has reiterated its desire to become a hub for Islamic bonds, finally changing its tax laws to be much more sukuk friendly. But with no natural investor or issuer base for the product, and rising competition from better suited Asian countries, Hong Kong will only ever be an also-ran.

Turkish Islamic lender Bank Asya said on Monday it had applied to the Capital Markets Board to issue sukuk worth up to 1 billion lira ($520 million). The bank said in a statement to the Istanbul stock exchange it had mandated its brokerage arm for the issue.