IslamicFinance.de

The Autoriti Brunei Darussalam (AMBD) has revealed the successful pricing of $100 million worth of sukuk or Islamic bonds. This will carry a maturity of 91 days that will end on 8 March 2012.
The latest issuance of the securities have a rental rate of 0.17 per cent.

Dear Reader,

The last weeks we have read about criticism in regard to the Sharia compliance of the Sukuk program of the investment bank Goldman Sachs:

< Mohammed Khnifer reveals, after examining the offer circular thoroughly, three possible flaws in the overall structure.
1- Strong indication from the proposed structure and the prospectus as well that the sukuk is not, as they claim, Murabaha, but a Reverse Tawarruq.
2- Strong indication that Goldman will be using, eventually, the proceeds to fund its conventional activities.
3- The so called Murabaha sukuk is listed on the Irish Stock Exchange (ISE). There are some concernes on how the ISE will make sure that the securities will be traded at par value.>>

http://www.islamicfinance.de/?q=node/3155

Some remarks to this discussion:

Africa is mooving its economic attention away from the west to the Middle East and Asia as a primary source of capital raising. This shift in alignment partially explains the expected launch of a number of Sukuk across the continent in 2012.
Countries that have announced sovereign Sukuk to raise capital for their budgets are: South Africa, Senegal, Nigeria and Kenya. This move is especially welcomed by sovereign wealth and Islamic finance institutions - especially in the GCC.

The deadline for financial institutions to submit proposals for advising the South African government on the structuring and issuance of its debut sovereign Sukuk will expire on Dec. 21.
Shortlisted candidates will be informed by Jan. 20, 2012, which means that the global mandate may take a few more months to be launched. Taking into account the structuring of the issuance, the documentation and the investor road shows, realistically, the South African debut benchmark issuance may only happen by the middle of 2012. The only one who can speed up the process is the South African National Treasury in Pretoria.
According to an official statement, the request for proposals is in line with the National Treasury's intention to mix up its funding and investor base.

Saudi Arabia has the largest population, GDP and oil reserves in the GCC region and is strategically and militarily important on both a regional and global scale. Despite all this, unlike its neighbors the UAE or Bahrain, Saudi Arabia is not a culturally or economically-welcoming place for international business and as such much of Saudi Arabia’s non-oil related business is an internal market.
The country has given birth to some monumental Sukuk over the last few years, like the 20-year $2.1bn Saudi Basic Industries Corporation issue of 2007.
Most of the Sukuk issued have been for internal consumption.

Africa has begun to move its economic attention away from the west to the Middle East and Asia as a primary source of capital raising. This shift in alignment partially explains the forthcoming launch of a number of Sukuk across the continent in 2012.
South Africa, Senegal, Nigeria and Kenya have all divulged sovereign Sukuk to raise capital for their budgets, a marked move away from aid and loans from the economies of Europe and the US and a move broadly welcomed by sovereign wealth and Islamic finance institutions – especially in the GCC.
Senegal, for exmaple will issue a $200m Sukuk, initially planned for this year but now most likely for the begin of 2012. Finance minister Abdoulaye Diop stated that proceeds from the Sukuk will be used for budgetary support.

It seems that Saudi Arabia is discussing with banks the issuing of a riyal-denominated Islamic bond. High-level talks are currently ongoing between the Saudi Arabian Monetary Agency (Sama) and a number of local and international banks with operations in the kingdom regarding the details, expecting an issue as early as the first quarter of next year.
The sukuk will not be launched directly by the government but will instead be marketed by either a governmental agency or a state fund.
The discussions with banks are focusing on the technicals of the issue, such as the tenor and whether the sukuk will have a fixed or floating profit rate.

Foreign issuance of sukuk in Malaysia is anticipated to increase by 25%-30% next year from 10%-15% currently owing to the global economic calamities and eurozone sovereign debt crisis.
Amanie Advisors Sdn Bhd director Baiza Bain noted that the sukuk issue would be US dollar and ringgit denominated issues mainly from the Gulf Cooperation Council (GCC) and Europe.
Asian Islamic Investment Management Sdn Bhd CEO and executive director Akmal Hassan has a positive outlook regarding the fact that the Government's pump priming activities would ignore impact from the tough external environment and this would augur well for the local economy and Islamic investment.

PLUS Bhd’s record RM23.4 billion (US$7.3 billion) sukuk sale is attracting life insurers with higher-than-average yields and maturities of as much as 25 years.
The Malaysian company is taking over the nation’s biggest toll-road operator PLUS Expressways Bhd in the first leveraged buyout using syariah-compliant bonds. It seems that a portion of the total issue will be privately placed, at tenors of 20 to 25 years.
PLUS was set up by Malaysia’s biggest pension fund, the Employee Provident Fund, and government-owned UEM Group Bhd. to take over the highway assets of PLUS Expressways following their RM23 billion acquisition of the company.

Bahrain’s Gulf International Bank (GIB) has finished the pricing and closing of its three-year $300m Sukuk through a private placement.
The Sukuk certificates will have a profit rate of six-month US dollar Libor plus 130bps and paid out on a semi-annual basis. The Sukuk will mature on December 7, 2014.

It seems that The Islamic Republic of Iran was the first country to introduce Sukuk to the financial market.
Mohammad Sajjad Siahkarzadeh noted that Iran arranged the operational mechanisms for issuing Sukuks in 1994 and introduced the mechanisms in the second Islamic Banking conference in Tehran in that year.
Siahkarzadeh also added that companies finance their operations using different financial tools such as selling stocks, bonds, etc, underlinning the fact that issuing Islamic bonds (Sukuk) is a means for funding projects.

The sukuk market is one of the fastest growing segments in the global financial market. Muhammad Al-Bashir Muhammad al-Amine shows this in the introduction of his book titled “Global Sukuk and Islamic Securitisation Market - Financial Engineering and Product Innovation”.
The book represents the latest analytical offering on the subject of sukuk and was published by Brill under its Arab and Islamic law series.
The point that the author tries to make is that sukuk market dynamics is as complex as other asset classes whether in Muslim jurisdictions or non-Muslim ones. These relate to a cornucopia of problems - regulatory framework, enabling legislation, ratings, Shariah structures, purchase undertaking, guarantees, especially third party Sukuk guarantees, SPVs (special purpose vehicles), trust laws, court procedure (in case of defaults and recourse to law especially for different creditors), listings, secondary market, arbitration clauses and so on.
Therefor, any analysis will have to begin from the basic proposition of the dynamics of the issuer jurisdiction, and these vary dramatically from country to country.

Sarawak Energy Bhd (SEB) intends to borrow an additional RM1.5bil in January 2012 in the form of Islamic debt (sukuk) under its RM15bil Sukuk Musyarakah Programme. This is in addition to its launch of RM3bil of sukuk in June this year which was oversubscribed by three times.
The RM1.5bil obtained next year would be consumed by SEB to fund the progress payments of some of its power plants and transmission lines currently being constructed as well as other capital expenditure requirements.
The joint lead managers for this second sukuk issuance under the Sukuk Musyarakah Programme are: AmInvestment Bank Bhd, Kenanga Investment Bank Bhd and RHB Investment Bank Bhd.

Malaysia is awaited to continue its strong 60% contribution to global sukuk issuance next year, supported by projects under the Economic Transformation Programme (ETP).
HSBC Amanah stated that this year a significant growth in sukuk was noticed, principally driven by issuance out of the country.
HSBC remained optimistic about the future over the medium term but anticipated some challenges in 2012.

Saudi Arabia is discussing with banks the possibility to launch a riyal-denominated Islamic bond, or sukuk as the kingdom abandons its aversion to sovereign-level debt to help build a local currency yield curve.
Talks are ongoing between the Saudi Arabian Monetary Agency and local and international banks with operations in the kingdom, with an issue forseen in the first quarter of next year. The sukuk will be marketed by a governmental agency or a state fund.

Abu Dhabi Islamic Bank (ADIB) stated that it had fully paid an $800 million, five-year Islamic bond which matured on December 12, 2011.
The bank had launched the maturing Sukuk in 2006 as part of a $5 billion trust certificate programme.

Sukuk will fund the new $7.2 billion airport project that is anticipated to issue in Jeddah within two months, inspite of a four-week delay of works related to the project. The statement came from head of the General Authority of Civil Aviation in Saudi Arabia, Prince Fahd bin Abdullah bin Mohammed al-Saud.
He also added that there are plans to change the General Authority of Civil Aviation to a stock-holding company and it will constitute four companies, specializing in four departments including international airports, domestic airports, air navigation, technology transfer and information.

The most anticipated launch for some time is the slated $2bn Goldman Sachs (GS) Sukuk that will close at the end of this month.
Mohammed Khnifer, external Islamic finance specialist for Edcomm Group Banker’s Academy in New York, stated that although the path GS is taking is full of controversy, it could open the door for the western conventional finance industry to enter the Islamic finance in a big way.
Khnifer argues in the first place the tradability mechanism of the Sukuk threatenes its Shari’ah compliance. Second, he debates that with GS being the beating heart of Wall Street and standard-bearer of free-wheeling casino capitalism it cannot guarantee to Islamic investors that it will ring-fence the proceeds of its Sukuk to support just Shari’ah compliant, Riba-free activities; especially as it has no Islamic window.

Gulf International Bank (GIB) communicates the successful pricing and closing of a three-year $300 million Sukuk-al-Murabaha private placement with a profit rate of 6-month USD LIBOR + 130 bps on a semi-annual basis.
The Sukuk will mature on 7 December 2014. It was successfully placed with a number of institutional investors, with J.P. Morgan acting as Sole Manager of the placement.

Nakheel made payments to the tune of ?Dh7.3 billion ($2 billion) to its trade creditors.
Nakheel will launch another Dh1 billion of sukuk before the end of this year as part of its Dh59 billion restructuring deal with trade creditors.
Under the company’s restructuring plan, the developer has presented trade creditors repayment of 40 per cent cash and the remaining 60 % in the form of sukuk.
Bank creditors will be offered an interest rate of four per cent over London Interbank Offered Rate (Libor) and repayment after five years.