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DP World hires banks for perpetual Islamic bonds - document

Dubai-based port operator DP World has hired a group of banks for a potential sale of perpetual U.S. dollar-denominated sukuk. Citi, Deutsche Bank and JPMorgan will arrange investor calls in Asia, the Middle East and Europe, to be followed by the issuance of perpetual U.S. dollar-denominated Islamic bonds non-callable for 5-1/2 years. Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Crédit Agricole, Samba Financial Group, Scotiabank and Standard Chartered Bank are also working on the deal.

Emirate of Sharjah hires banks for #sukuk that could go up to $1 billion

Sharjah has hired banks to arrange the issuance of seven-year U.S. dollar denominated sukuk. HSBC was hired as global coordinator for the planned transaction and is joined by Bank ABC, Dubai Islamic Bank, Gulf International Bank, Mashreqbank and Sharjah Islamic Bank as joint lead managers and bookrunners. The emirate will hold a call with investors on Monday and a benchmark sukuk issuance may follow, subject to market conditions. Benchmark bonds are generally meant to be over $500 million, but a source close to the deal said the transaction could range between $750 million and $1 billion.

Emirate of Sharjah starts marketing 7-year dollar #sukuk - document

Sharjah began marketing a seven-year dollar denominated sukuk. It comes as several governments in the Gulf seek to bolster their finances to face the economic fallout from the coronavirus pandemic and a slide in oil prices. Sharjah gave an initial price guidance of around 275 basis points over midswaps for the sukuk. Sources said the issuance would likely be between $750 million and $1 billion.

#UAE's Sharjah Islamic Bank readies capital-boosting dollar #sukuk

Sharjah Islamic Bank is expected to issue U.S. dollar-denominated sukuk by the end of June to boost its Tier 1 core capital. The bank's board approved earlier this year the issuance of sharia-compliant Tier 1 instruments for up to 2.8 billion dirhams ($762 million). Last year, Sharjah Islamic raised $500 million in sukuk with HSBC and Standard Chartered as global coordinators, attracting around $950 million in orders. A few other Gulf issuers are also expected to tap the international debt markets over the coming weeks, taking advantage of cheaper funding costs after a drop in yields on the benchmark U.S. Treasury rates.

#UAE's Majid Al Futtaim markets green dollar #sukuk

UAE-based shopping mall operator Majid Al Futtaim is set to raise between $500 million and $650 million in green sukuk. The proceeds of the sukuk will back environmentally-friendly projects in areas such as renewable energy and sustainable water management. The price guidance for the deal, which has so far attracted around $2.7 billion in orders, subsequently went down to around 225-230 basis points over mid-swaps. HSBC and Standard Chartered have been hired as global coordinators for the planned deal, and they are working as bookrunners along with Abu Dhabi Islamic Bank, Dubai Islamic Bank, ENBD Capital, First Abu Dhabi Bank, and Gulf International Bank.

#Saudi Arabia's Al Rajhi Bank to boost mortgage #lending

Al Rajhi Bank aims to boost mortgage lending as more affordable housing comes on the market. CEO Steve Bertamini said the bank's mortgage book grew 27% year-on-year in 2018 and it is looking for double digit growth for the next two to three years. Al Rajhi, which has traditionally focused on consumer banking, has been expanding its exposure to the private sector. It also sees opportunities in project finance as public-private partnership contracts for water and renewable energy start to be awarded. Saudi Arabia's economy grew in the fourth quarter of last year at its fastest rate since early 2016 due to an expanding oil sector. Fourth-quarter gross domestic product grew by 3.59% from a year earlier.

Wahed Invest robo-adviser expands with new Islamic index funds

New York-based Wahed Invest has launched two sharia compliant index-tracking funds under its robo-adviser platform. According to CEO Junaid Wahedna, the company's goal is to make every asset class available to Muslim investors. The new equity funds launched by Wahed will track indices that are screened by Standard & Poor's. The funds have no lockup period and only charge an advisory fee rather than a management fee. Wahedna added that a recurring deposits tool has proven to be popular among clients, most of whom are first-time investors. Wahed raised $5 million in seed capital last year. The investment firm is backed by Gulf investors and venture firms including Boston-based Cue Ball Capital and Dubai-based BECO Capital.

#Morocco to issue first sovereign Islamic bond worth 1 bln dirhams

Morocco is preparing to issue its first sovereign sukuk worth 1 billion dirhams ($105 million). According to Finance Minister Mohamed Boussaid, the legal framework is now prepared and issuance is expected in the coming weeks. Earlier, the cabinet adopted a decree allowing financial authorities to define different types of sovereign sukuk, in line with the opinion of Morocco's council of Muslim scholars. Last year, Morocco's central bank approved five requests to open Islamic banks and allowed subsidiaries of three French banks to sell Islamic products. Morocco is the most advanced among its North African neighbours in developing Islamic finance, but Tunisia and Algeria have also started to explore Islamic banking.

Islamic banks face uneven impact from correspondent banking decline -industry group

The General Council for Islamic Banks and Financial Institutions (CIBAFI) has warned of uneven impact from a decline in correspondent banking, reinforcing concerns that small lenders will be most affected from "de-risking" by international lenders. Heightened money laundering enforcement has pushed global banks to cut their relationships in some regions, a policy known as "de-risking". Islamic banks in Africa and South Asia were among those most severely affected, with banks in the Gulf and Europe relatively unscathed. A recent CIBAFI survey of 103 Islamic banks found around a third of respondents experienced a significant decline in correspondent banking. Products most affected included trade finance and international wire transfers. CIBAFI said the practical impact of de-risking might be confined to certain regions and lenders, but it had been severe enough to raise wider concerns.

#UAE's Dana Gas plans cash dividend despite $700 mln #sukuk dispute

Dana Gas plans to pay a dividend for 2017 despite its legal dispute with investors demanding that the company settles $700 million of sukuk bonds. International funds and local investors want Dana to direct its resources towards repaying that debt. Dana last year halted payments on its sukuk, saying the bond had become unlawful in the United Arab Emirates because of changes in Islamic finance. Dana has been in talks for months with creditors to restructure its sukuk. One of the proposals envisaged Dana redeeming 10% with cash and rolling over 90% under new terms. However, creditors want the company to redeem a higher proportion of the sukuk.

Ratings scheme planned for #Islamic #endowments

Islamic institutions in Bahrain and Malaysia are developing a ratings scheme for Islamic endowments, or awqaf. The Bahrain-based Islamic International Rating Agency and the Malaysia-based International Institute of Islamic Waqf (IIIW) hope that greater accountability in the management of awqaf can help integrate them into Islamic financial markets. This could mobilize idle assets which are estimated to be valued between $100 billion and $1 trillion across the globe. Awqaf operate social projects such as hospitals, mosques and schools with donations received from Muslims. Most Awqaf do not disclose financial figures, but their underperformance is believed to be considerable since they have traditionally been run by administrators rather than investment managers.

In expanding role, IILM plans longer tenor Islamic bonds programme

The International Islamic Liquidity Management Corp (IILM) plans to expand issuance of sukuk beyond its current short-term programme to address latent demand from Islamic banks. Establishing a new medium-term programme would allow the IILM to offer a wider range of highly liquid financial instruments. The IILM currently has around $3 billion in outstanding sukuk and it could gradually increase this to between $3.5 to $4 billion, depending on consistency of demand. Around 60% of demand for IILM sukuk comes from Islamic banks in Gulf countries with the rest split across Asia and international banks. But there is also potential for IILM sukuk in non-member countries, such as Oman and Britain as well as jurisdictions such as Hong Kong and Singapore.

#Qatar developer Ezdan’s #sukuk yields spike after S&P downgrade to junk

Standard & Poor's downgraded Qatari real estate developer Ezdan Holding on Monday. Therefore, yields on the company's $500 million sukuk jumped by about 2 percentage points after the downgrade. S&P cut the Qatari company by two notches to BB from BBB-minus and revised its outlook to negative from stable. The rating agency cited a weakening of the company's financial risk profile partly caused by the neighbouring Arab countries' boycott of Qatar. Ezdan's sukuk, issued in 2016, were yielding around 6% last week, now the yield has surged to over 8%. The sanctions have worsened a slump in Qatar's real estate market. Housing and utility prices sank 4.7% from a year ago in September, their biggest drop for at least several years, and fell 0.7% from the previous month.

#Malaysia's MBSB agrees to buy Asian Finance Bank for $152 mln

Malaysia Building Society Bhd (MBSB) plans to acquire Asian Finance Bank (AFB) from its foreign shareholders for 645 million ringgit ($152.5 million). Malaysia Building Society agreed with AFB's shareholders to pay 396.9 million ringgit in cash and the issuance of 225.5 million new shares at 1.10 ringgit per share. The deal values AFB at 1.3 times book value, MBSB said. MBSB has sought to become a full-fledged bank in the last few years. In 2014 a three-way merger deal with CIMB Group Holdings and RHB Bank was planned, but the plan fell through in early 2015. Talks with Bank Muamalat Malaysia Bhd in the last quarter of 2015 also collapsed.

Dana Gas and partners start arbitration case against MOL over #Kurdistan settlement

Dana Gas and its partner Crescent Petroleum have begun arbitration proceedings against Hungary's MOL Group over Dana's settlement agreement with the Kurdistan Regional Government (KRG). The KRG agreed to pay $1 billion to the consortium and to reclassify some additional $1.24 billion from debt to outstanding costs. MOL is unsatisfied with the way Dana Gas, Crescent Petroleum and the Pearl consortium handled the settlement and would have pursued a final litigation and enforcement outcome against KRG instead. Dana and Crescent Petroleum own a combined 70% stake in the Pearl consortium, while Austria's OMV, Germany's RWE, and MOL each own 10%. The KRG settlement boosted Dana's cash balance and lifted the company's stock on the Abu Dhabi stock exchange by 14%. Last week Dana bondholders requested a $300 million cash paydown, but Dana refused the proposal and the case is now being disputed in a London High Court.

#Bahrain sends RFP for US dollar bond and #sukuk issues

Bahrain has sent out a request for proposals to banks to arrange issues of US dollar-denominated conventional bonds and sukuk. Bahrain needs to raise external financing to plug a budget deficit caused by low oil prices, as the state struggles to build political consensus around planned austerity measures. Last month the cabinet approved a draft budget projecting a BD1.3bn (US$3.4bn) deficit for 2017 and a BD1.2bn deficit in 2018. Bahrain had a deficit of BD1.5bn in 2016. Bahrain is rated BB- by S&P with a negative outlook. The agency last month revised the outlook to negative from stable, citing Bahrain's weakening external asset and fiscal positions. Fitch followed suit, revising the country's outlook to negative but affirming its BB+ rating.

UAE's Dana Gas aims to propose new #sukuk terms in coming weeks

According to Dana Gas CEO Patrick Allman-Ward, the company aims to communicate proposed terms of a restructured sukuk issue in coming weeks. He spoke to sukuk holders in a conference call, but there was no question and answer session and no immediate response from creditors. In mid-June, Dana stunned creditors by announcing it would halt payments on its four-year sukuk because they no longer complied with changing interpretations of the Sharia code. Dana said it would exchange the sukuk for new Islamic instruments with lower profit rates than the existing paper. Investors and bankers are concerned that other sukuk issuers could imitate Dana in refusing to redeem paper on the grounds that it has lost its sharia-compliance. CEO Allman-Ward insisted that Dana's arguments did not apply to other, lawful sukuk formats. Dana's existing paper features profit rates of 7 and 9%. The new sukuk would provide profit distributions at less than half the rates. Sukuk holders are contesting the plan in courts in London and the emirate of Sharjah.

Amid Dana debacle, Islamic finance seeks safeguards against illegality claims

The Islamic finance industry is seeking ways to safeguard deals against challenges to their religious permissibility. Sharjah-based Dana Gas declared it would not make payments on $700 million of sukuk because Islamic finance standards had changed since the instruments were issued. This raised concern across the Islamic finance industry that more companies could avoid redeeming sukuk by adopting the same argument as Dana. To try to avoid similar cases in future, investors may demand more detailed and restrictive language in sukuk documentation. Such language already exists for some sukuk, but it is not used consistently and is not standardised. Investors may also screen the groups of scholars who provide sharia endorsements for sukuk. The newly formed high sharia authority for Islamic banking and finance is expected to set rules and a general framework for Islamic finance governance in the United Arab Emirates.

Three-way bank #merger in #Qatar aims to close by year end -sources

Executives working on a three-way bank merger in Qatar expect to finish valuing the deal in the coming weeks. Shareholders at Masraf Al Rayan, Barwa Bank and International Bank of Qatar are committed to pushing ahead with the deal despite the current embargo by some of Qatar's Arab neighbours. A shake-up has long been mooted in the Qatari banking sector given that 18 local and international commercial banks serve a population of 2.6 million. The more than two-week travel and diplomatic boycott could further dent bank performance if the dispute drags on. In December, Reuters reported that the trio had begun merger talks which would create the Gulf state's second-largest bank. The new bank, which would be run in compliance with Islamic banking principles, would have assets worth around 160 billion riyals ($43.6 billion).

#Saudi Arabia's Sedco Capital launches #green #investment strategy

Saudi Arabia's Sedco Capital has launched an investment strategy combining environment-conscious and sharia-compliant principles. The move could help develop green investing in the Middle East and make Islamic finance appeal to a wider client base. Green finance is increasingly important for Islamic firms seeking to differentiate themselves from peers. Sedco said its new strategy, dubbed Prudent Ethical Investing, would focus on due diligence and transparency around investment structures, while integrating environmental, social and governance (ESG) criteria. The firm launched two ESG funds in 2012 and has published research which showed how a combined investment approach
can outperform conventional funds. According to its research, such a strategy can lead to investments with lower financial leverage and better cash conversion qualities, adding a prudential element to those portfolios.

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