IslamicFinance.de

The marketing campaign of solar panel and heating installer The Solar Guys' first sukuk has been going on for a while. The Islamic bond, due in the first half of 2013, serves to fund a 250MW solar power plant in Indonesia. The Solar Guys and Mitabu have formed a joint venture called SGI-Mitabu. The joint venture aims to raise $500 million to build and finance the power plant.

In 2013 the government of Saudi Arabia plans to issue bonds backed by the Kingdom’s Ministry of Finance. The bonds will be used to fund construction work at airports in Riyadh and Jeddah. According to the Kingdom’s General Authority for Civil Aviation (GACA), its plans include the issuance of a second sukuk at the end of 2012 in order to help fund its SR27 billion ($7.2 billion) airport in Jeddah. The first sukuk which was launched earlier in 2012 managed to raise SR15 billion to help fund the Jeddah airport development.

Dear Reader,

Islamic finance had another great year. Many of its market segments progressed, like for example the Sukuk market gaining more maturity. Despite the ongoing debt crisis a good sign of hope and happiness.

Nevertheless we are - as an industry - still not satisfied with the achievements. Islamic finance shall grow stronger in terms of social impact and in terms of substance:

Hence, please allow me to re-iterate my call for participating in international initiatives beyond just our own industry to learn and spread knowledge and experience:

Calling Islamic financial institutions to become member of the United Nations Finance Initiative
http://www.islamicfinance.de/?q=node/811

Inshallah we see more Islamic financial institutions taking a lead in SRI, Social Impact Investing and other approaches while contributing with Islamic finance knowdledge to the conventional industry. The time is now; and there are signs that Malaysia aims for a lead:
http://www.islamicfinance.de/?q=node/4151

This year's record of $46 billion in terms of global sukuk sales is very likely to be exceeded in the coming year. A key reason is that countries like Oman, Tunisia and Egypt are just entering the market. Borrowing costs on Sharia-compliant debt have decreased 11.4 percentage points reaching 2.82% since the end of 2008 due to central banks in Europe, the US and Japan pumping funds into their economies in order to enhance growth rates. A rise in the Islamic banking assets will drive the demand so that it can reach $1.8 trillion next year. Compared to that, in 2011 the demand was $1.3 trillion.

The government of Indonesia plans the issuance of rupiah-denominated sukuk next year which shall be used for financing state projects. Analysts welcome this move considering it a breakthrough in the development of the country’s undersized Islamic finance sector. According to the 2013 state budget financial note, up to Rp 1 trillion (US$103.5 million) will be borrowed by the Finance Ministry using sukuk issuance to finance state projects next year. Islamic bonds should be perceived as an alternative source of financing for the government’s infrastructure projects.

The International Islamic Financial Market (IIFM) is progressing on a variety of Sharia products issued. This was made known at their 27th board meeting which was hosted by Kuwait Finance House - Bahrain in Manama. The mentioned products include Interbank Unrestricted Wakalah standards, Islamic Currency Hedging product standards and Collateralised (Rahn) Product Standard. Moreover, the board reached an agreement on the initiation of several new standards among which Ijarah sukuk standardisation as well as consultation on credit support arrangement concerning Islamic hedging.

The SGI-Mitabu launched the first ever Aussie sukuk in the Malaisian offshore tax haven Labuan, thus avoiding Australian rules that penalize Sukuk. The offshore paradise Labuan which has established a global financial hub in 1990 is located on the coast of eastern Sabah state on Borneo Island (Malaysia).

Malaysian car distributor UMW is going to launch a refinancing program worth 2 billion ringgit ($653 million) in order to refinance existing debt and fund investment. The 15-year plan will be arranged by Maybank Investment Bank and Standard Chartered

The Gulf Bond and Sukuk Association has named a new chair of its steering committee and announced the creation of a sub-committee to promote asset management within the region. Giambattista Atzeni has replaced Andrew Dell as a new chair of the GBSA steering committee for 2013.

Banque Saudi Fransi (BSF) wants to close a SR1.9 billion ($506.6 million) Lower Tier 2 Islamic bond issue. This should grow bank's subordinated debt or Tier 2 capital. Although the sukuks has a seven-year maturity, it is callable, so it can be repaid already after five years.

Dana Gas will pay $70 million in cash to bondholders and offers aditionally 8% coupon on remaining debt in order to buy time to restructure its sukuk. The company is facing difficult times as it missed a bond redemption on its sukuk that has matured on October 31. In order to fix this problem, Dana has made an agreement with adhoc committee of creditors, and thus earned time to restructure its finances.

Saudi Arabia-based Saviola Group is about to launch a new Sukuk program, according to a filing on the Saudi exchange from December 15. The Sukuk will be issued in a series of tranches and its value will not exceed the Company's paid-up capital.

The time necessary to issue an Islamic bond is a crucial issue for the sukuk Islamic bank market. According to Rushdi Siddiqui, Thomson Reuters global head of Islamic finance, the Malaysian sukuk market is developed in such a way that quick issuance is possible. The region needs to follow this example. Siddiqui compared the sukuk market with the state of the eurobank market in the 1960s and 1970s. Consequently, the sukuk market has to move in a forward direction and raise efficiency.

For the second time, the Turkish Bank Asya will try to issue a debut dollar-denominated sukuk worth up to $300m. The issuance is planned for the first quarter of 2013. The sukuk is expected to bring up to TL150m ($57m) of lira denominated paper.

The findings of Thomson Reuters' and Zawya's Sukuk Perceptions and Forecast Study have been released. The study was conducted in November this year and focuses on a survey of sukuk lead arrangers and investors conducted in August and September 2012. The primary empirical data have been used as a base for forward-looking analytics on the appetites and preferences of sukuk investors for 2013 and beyond. The study states that global captive sukuk demand is likely to to double from $240 billion in 2012 to reach $421 billion by 2016.

Dana Gas PJSC completed restructuring its $920 million of Islamic bonds after reaching an agreement to pay twice the average yield on emerging markets corporate sukuk. Bondholders, some of which are BlackRock Inc (BLK) and Ashmore Group Plc (ASHM), will be paid $70 million in cash. The remaining Shariah- compliant debt will be split into convertible bonds and an ordinary sukuk of equal value worth $425 million. The profit rate of the five-year convertible bonds will be as high as 7% and the profit rate of ordinary sukuk 9 respectively.

The draft of the sukuk law aiming to regulate the trading of bonds in a manner compliant with Islamic law was finished by the Egyptian Financial Supervisory Authority (EFSA). In a statement, EFSA explained that the draft was created following a detailed study of international experiences in such regulations. Topics included in the draft are activities which can be financed by sukuk and the various kinds of financing instruments available. Before issuance, the bill stipulates the approval of a committee of three Islamic finance scholars on any sukuk offering.

The International Islamic Liquidity Management Corp (IILM) intends to issue its first sukuk at the beginning of 2013. A board meeting next week has been scheduled by the company. Plans concerning the issuance will be discussed there an length.

At a recent extraordinary general meeting (EGM) the Savola Group gave its approval for the issuance of a sukuk. The bond's total total value shall not be higher than the company’s paid-up capital. THe EGM furthermore voted the delegation of the issuance of such tradable debt instruments to the Board the authority without reverting to the General Assembly.

The Egyptian Financial Supervisory Authority's (EFSA) draft law regulating Shari’a compliant debt tools has been brought to a final version. The proposition consists of 30 articles which establish a legal framework for the issuance and transaction of sukuk. The purpose of the law is to expand the scope of activities that sukuk can finance. Moreover, it shall allow the issuance of business sukuk.