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Pace of Sukuk issue steps up as Ramadan looms

By Jonathan Patricks

With Ramadan just around the corner it seems that the Islamic capital market is in a rush to get everything signed, sealed and delivered before the end of next week. One of the highlights of the last week was news from Turkey that the government was preparing its first Sukuk. According to reports, the moderate Islamic government of Recep Tayyip Erdoğan is for the first time since its rise to power nearly a decade ago, reaching out to the east in its search for diversified funding, looking at a $1bn debt raise. It was reported that HSBC, Citi and Deutsche are on the hook as advisers. If the Sukuk goes through, it would create a benchmark, so expect a lot more corporate borrowing from the Islamic debt capital markets in the coming years.

However, even bigger news is the proposed maiden sub-Saharan Africa Sukuk slated in South Africa. Reports state that the Sukuk will be a $500m to $700m dollar-denominated, five-year, Ijarah targeting primarily GCC investors. Standard Bank of South Africa, BNP Paribas, Albaraka, Nova Capital Partners, Liquidity Management House and Regiments Capital are mooted as mandated lead arrangers. In Sudan the government completed the latest tranche of its Sukuk programme, raising $160m in a Sudanese pound issue with two more tranches due this year. The government is also aiming to issue about $760m in dollar-denominated Sukuk in 2012.

Also at the sovereign level, in the more traditional heartlands for Islamic finance in the Middle East the State of Qatar is preparing a Sukuk after tapping up the conventional markets last year for $5bn. Despite being a strong supporter of Islamic banking, Qatar has not been to the Islamic capital markets for a decade. Reports claim HSBC, Standard Chartered, Deutsche, Barwa Bank and QInvest are involved with proposed Sukuk which will hit the road in Kuala Lumpur this week.

QNB, Commercial Bank of Qatar and Doha Bank have all been to the capital markets this year, but Sukuk issuance is still slow in the tiny Gulf state.

The quasi-sovereign and corporate markets were also active with some of the highlights this week being Dubai Duty Free’s $1.75bn syndicated loan deal. The credit facility, with both Islamic and conventional facilities seemed to be a red letter day for most of the local banks.

Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Citi, Dubai Islamic Bank, Emirates NBD and HSBC acted as bookrunners and mandated lead arrangers, according to a statement. Other MLAs were Gulf International Bank, Al Hilal Bank, Mashreq Bank, Qatar National Bank and Commercial Bank International with lead arrangers including Commercial Bank of Dubai, National Bank of Abu Dhabi, Samba Financial Group and Union National Bank. Also involved were Gulf Bank, BAWAG, Arab Bank, First Gulf Bank, Noor Islamic Bank, and Sharjah Islamic Bank, Ajman Bank, Ahli United Bank, Bank of Bahrain and Kuwait, National Bank of Kuwait and United Arab Bank.

EIB also priced a $500m Sukuk due to mature in January 2018, priced at par at a spread of 310 basis points over midswaps and carried a profit rate of 4.147%. Emirates NBD Capital, Credit Agricole, Dubai Islamic Bank, HSBC and Standard Chartered were arrangers.

The activity looks set to continue next week before the inevitable summer slowdown and Ramadan sees activity crawl to a halt for a few months in the summer.