The Islamic Globe

Omani Shari’ah authority holds first meeting

The High Sharia Supervisory Authority held its inaugural meeting at the Central Bank of Oman HQ in Muscat with Sheikh Dr Kahlan bin Nabhan Al Kharoosi, Sheikh Dr Abdullatif bin Mahmood Al Mahmood, Dr Said Bouheraoua, Ahmed Suhaimi bin Yahya and Dr Yaqoob bin Mohammed Al Waily in attendance. The formation of the High Sharia Supervisory Authority is considered pivotal to the CBO's efforts to introduce Islamic banking to Oman in a way that is likely to match demand. Both standalone Islamic banks as well as Shari’ah compliant windows are allows in Oman, unlike neighbouring Qatar.

ADIB makes record profit

Abu Dhabi Islamic Bank (ADIB) has announced earnings for the nine months to the end of September up 21.1 per cent with customer deposits up 18.2 per cent compared to the corresponding period last year. Profit reached AED1.34bn compared to AED1.11bn for the same period last year. The CEO of ADIB said that all customer-facing units, retail banking, private banking, community banking and wholesale banking continued to grow market share and as a consequence, ADIB’s customer financing assets increased 21.7 per cent year-on-year to AED71.6bn backed by an 18.2 per cent increase in customer deposits to AED82.9bn over the same period.

Japan joins the Sukuk party

Japan’s Bank of Tokyo-Mitsubishi UFJ is set to issue a two tranche Wakala Sukuk. At present the bank is allowed by the regulator in Japan only to handle Islamic financial transactions out of Malaysia through a subsidiary called BTMU Malaysia. BTMU will issue the Sukuk in a $25m US$ tranche and a 2.5bn yen tranche with both tranches carrying maturities of one year. CIMB Investment Bank is managing the issues.

Covered Sukuk

Covered bonds are generally backed both by the issuer and by a specific pool of assets. Issuers of covered bonds are generally banks and they typically issue covered bonds at tenors of 5 to 10 years, compared with a norm of 3 to 5 years for unsecured bonds. Covered bonds allow banks to diversify their investor base and reduce their funding risk. From an investor’s perspective, such bonds can be attractive because they are high-quality instruments that offer attractive yields and are often more secure than relying on the credit worthiness of the issuer alone. Covered bonds usually trade at lower yields to corporate debt because of this. From an issuer perspective covered bonds can be a low-cost way to expand the business in preference to issuing unsecured debt instruments.

Nakheel rules out Sukuk and looks to bank debt

Nakheel has said that it will not sell Sukuk to fund its growth plans, in the hope that its recovery from the risk of default in 2009 will help it secure cheaper funding from banks. Chairman of Nakheel, Ali Rashed Lootah, said the firm will not go for a bond because bonds are more expensive than commercial lending from the banks actually. He considers Nakheel being in a strong position to negotiate with lenders, with banks, and get good terms especially after what they have achieved.

AmIslamic gets sophisticated

AmIslamic Bank, subsidiary of AMMB Holdings, has received the necessary approvals from both Bank Negara Malaysia and the Securities Commission of Malaysia to set up a subordinated Sukuk Murabahah programme with a value of RM3bn. The subordinated Sukuk Murabahah programme has a tenor of up to 30 years from the date of issue and each tranche will have a tenor of five years minimum. In a market filing the issuer said that RAM Rating Services had assigned a preliminary long-term rating of 'AA3' to the Subordinated Sukuk Murabahah under the programme.

Qatar central bank makes the running with Sukuk

Across the globe governments and corporates are attempting to take advantage of low interest rates caused by the US Federal Reserve’s extraordinary bond buying programme, locking in long term borrowing at peppercorn rates. The central bank of Qatar hopes to issue a mixture of conventional and Islamic government debt with a face value of $6.6bn. The debt programme will be at the shorter end of the yield curve and will be sold in three and five year tenors. Just under half the issuance will be Sukuk, with the rest in conventional instruments. Managing duration is very important for bond fund managers as it allows them to determine the risk on their total bond portfolio for a given move in interest rates. A longer duration bond will move more in value than a bond with a shorter duration for each 0.01 per cent (or 1 basis point) move in interest rates.

Another big year for Malaysia Sukuk

The US Federal Reserve will likely continue trimming its asset purchases by $10bn a month – from $85bn a month – until it stops altogether later this year.This will mean that historically low interest rates and fixed income yields could rise as the globe’s economies start to recover and inflation kicks in. Borrowers want to lock in those low rates now and this means a rush to issue. Data from Bloomberg show that planned Sukuk sales in Malaysia for January are already double those for the whole of January 2013. Corporates have announced $1.7bn in Sukuk compared to the $700m total sold in January last year. Depending on what happens to interest rates, global Sukuk issuance volumes seem likely to wane as rates rise and the cost of borrowing increases. The other major fear is that the China debt bubble will burst and send shockwaves through the world’s economies with the epicentre on South East Asia.

First Perpetual Sukuk for Saudi

Saudi dairy firm Almarai is said to be looking to sell Perpetual Sukuk, the first from an issuer in the Kingdom of Saudi Arabia. This will be senior Sukuk that does not mature which means that from a credit point of view it is treated as equity rather than debt. BNP Paribas, HSBC Saudi Arabia, Saudi Fransi Capital and Standard Chartered are said to the joint lead managers for the Perpetual Sukuk. Almarai already sold SAR1.3bn of five- and seven- year Sukuk in March of this year.

A good year for Islamic finance in Qatar

Qatar is in a good position to face future challenges due to its economic and business diversification. The emirate is member of several economic and commercial agreements and organizations, and has been engaged in trade and investment negotiations with the European community and Japan. Therefore, Qatar will probably be able to avoid dependence on oil and gas production and to benefit from foreign direct investments in the future.

UM Financial bankruptcy comes to a close

Civil proceedings against former UM Financial CEO Omar Kalair and his associates have come to a close since prospects for recovery of expropriated money are limited even in case of a favorable judgment. However, the Royal Canadian Mounted Police and Office of the Superintendent of Bankruptcy are still investigating the events which may lead to criminal charges against Kalair and others.

GFH Capital, Leeds United and Shari’ah law

The takeover of Leeds United Football Club by GFH Capital raised disputes on the level of Shari’ah compliance associated with the deal. A statement by David Haigh, deputy chief executive officer and chief operating officer of GFH Capital, stumbled upon rather negative reception. He compared Leeds United to young Pamela Anderson in terms of good shape and future perspective. Also, the fact that a soccer club where alcohol, gambling and pork feature in the mix is subject of acquisition, the question arises whether it is at all compliant with the Shari’ah principles.

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Limitless thrashes out settlement

Property giant Limitless has made a deal to to restructure $1.2bn (Dh4.4bn) of Shari’ah compliant debt with its lenders. The syndicate was established in 2008 and was originally due in 2010. Because of the restructuring, the company's ownership will be transferred to the government of Dubai. Limitless has set to repay all its creditors by 2016.

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A solar project financed by Sukuk in Indonesia

Solar Guys, an Australian solar company, is installing a 50MW solar facility in Indonesia, the money for which is gained through sukuk. The project is part of a larger solar energy plan - a 250MW plan titled "one solar watt per person". Solar energy is an example of an area where Islamic finance can give additional value to both Muslims and non-Muslims since it is promoting greater sustainability.

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Bill Gates joins the IDB

In accordance with his tendency to use his fortune to solve global problems of the world’s underprivileged, Bill Gates has turned to Islamic Development Bank (IDB). The Bill and Melinda Gates Foundation has signed an MOU with IDB which aims to fight communicable disease and food insecurity in poor countries. In a five-year plan established by the MOU, projects concerning agricultural development, malaria prevention and elimination as well as polio eradication will be worked on. Third World countries included in the plan are Pakistan, Afghanistan and Nigeria.

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GFH Capital wants Leeds all to itself

According to GFH Capital, it wants to buy the football club Leeds for itself and is not acting on behalf of a third party. The bank plans to acquire all 100% of Leeds City Holdings Limited's equity in an all-cash deal. In case of a successful bid, the chairman and owner of the club - Ken Bates - would sever all ties with the club. Even though discussions about the transaction have started about half a year ago, it is still not certain where the bank would find the cash to finance the deal. The sum is estimated at about $81m. The bank's parent - Gulf Finance House - claims to be short of finance.

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Islamic finance – crisis for jobseekers

The educational system provides numerous young specialists in Islamic finance, however, they are hardly able to find a job. According to a UAE senior Islamic banker, one of the main problems in the industry lies in the lack of suitable graduate training programmes and internships. Thus, it becomes very difficult to absorb the growing number of graduates. The solution to this issue is in the hands of the corresponding institutions themselves. Moreover, employers look for experienced employees and even prefer experienced candidates from the conventional banking sector.

IILM ready for maiden USD Sukuk in "a matter of months"

After a period of silence, International Islamic Liquidity Management Corporation (IILM) announced that it was 85% ready to use between $300m and $500m for the issuance of US dollar Ijara Sukuk. The corporation is backed up by sovereign assets of its member countries. The issuance is expected in the very near future. According to plan, it will not be just one singular Sukuk but there will rather be a continuous supply of it. Up to $2bn is the expected amount in issuance per year.

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Launch of world’s first Islamic global asset manager

Safa Investment Services is going to launch world's first Islamic global asset management company due to growing demand from wealthy Muslim investors that are seeking a dedicated asset manager to look at their investments.

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BB for Turkey Sukuk

Standard & Poor’s has rated Turkey's debut $1.5bn Sukuk lease certificates that fall due in 2018 'BB'. The issuance of the Ijarah certificates will be conducted by Hazine Mustesarligi Varlik Kiralama Anonim Sirketi. The assets underlying the lease consist of buildings and land owned by the country. The transaction further allows the state to sells a pool of property assets to the issuer.

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