LONDON, 13 August 2007 — Following the recent Sukuk issuances by Saudi corporates such as the SR5 billion Saudi Basic Industries Corporation (SABIC) issue, the SR5 billion Saudi Electricity Company (SEC) issue and the $1 billion Dar Al-Arkan Real Estate Development Company issuance, it is now the turn of corporates in the UAE and Qatar to go to the Islamic debt market to raise financing.
It is as if there is an unintended competition between the Kingdom and the UAE, especially Dubai, although some bankers stress that Dubai has a headstart and that it will take some time for the Kingdom to reach a critical mass in Sukuk issuances and securitizations.
Sukuk issuance, according to Salah Jaidah, CEO of Qatar Islamic Bank, in Qatar is also just starting to take off, but will take some to establish itself in the market because of a lack of Sukuk and trust laws in Qatar. However Qatar Islamic Bank has recently mandated Rasameel Structured Finance of Kuwait and an international bank, to review its assets pool, with a view to securitizing bundles of them over the next two years.
The three latest offerings — two from the UAE and the other from Qatar, are the $1 billion Sukuk Trust Certificate Program launched by Emirates Islamic Bank PJSC of which the first tranche, a $350 million issuance has already gone to the market; the $210 million asset-backed issuance of notes on behalf of Tamweel, a provider of Islamically-compliant residential real estate finance in the UAE; and the $300 million Sukuk Al-Mudarabah issued on behalf of Qatar Real Estate Investment Company (Alaqaria) — the first rated Sukuk to be issued by a Qatari corporate.
The Emirates Islamic Bank (EIB) Sukuk Program follows the ones announced earlier this by Dubai Islamic Bank (DIB) with a $10 billion program; and Abu Dhabi Islamic Bank (ADIB) with a $5 billion program. The first tranche of the ADIB program — a $800 million Sukuk lead arranged by HSBC Middle East was successfully closed in May 2007.
The first $350 million tranche of the EIB program was lead arranged by Emirates Bank International, the parent of EIB and also the guarantor for the issuance and Standard Chartered Bank. The transaction was the debut Sukuk of EIB which also was assigned an ‘A’ rating by Standard & Poor’s and an ‘A1’ rating by Moody’s.
The Sukuk was issued through a special purpose vehicle, EIB Sukuk Company Ltd which is registered in Cayman Islands. The offshore banking center, which is a popular offshore domicile for Islamic finance transactions, earlier this year introduced a dual language English and Arabic incorporation and registration service — the first offshore center to do so. The aim is specifically to attract more Islamic finance business to the island’s financial center. According to Debashis Dey of Clifford Chamce, the City law firm who advised EIB and Emirates bank International, “the programmatic nature of this Sukuk transaction greatly improves the efficiency of Shariah-compliant finance.”
The $210 million Tamweel mortgage securitization was jointly lead managed by Morgan Stanley and Standard Chartered Bank, and according to Denton Wilde Sapte, the City law firm who advised the joint lead managers, is one of the first rated Shariah-compliant residential asset-backed securitizations.
Emirates National Securitization Company (ENSEC), one of the first securitization companies in the Middle East, played a key role in structuring the $210 million asset-backed issuance of notes on behalf of Tamweel. “ENSEC are trying to introduce securitization into the Middle Eastern markets, and we’re delighted to have worked on this deal, which opens further possibilities for Shariah-compliant fundraising,” Banking and Finance partner Richard de Belder said.
According to Farmida Bi, head of Islamic Finance at Denton Wilde Sapte, the Tamweel securitization is ground-breaking in many areas: it is the first residential financing securitization to rely solely on the underlying assets; it is multi-tranched in an Islamically compliant structure; and it is rated.
Denton Wilde Sapte also advised HSBC Bank plc as lead manager on the $300 million Sukuk Al-Mudarabah issued by Alaqaria, which is listed on the London Stock Exchange. This is Alaqaria’s second Sukuk issue.
following its debut $270 million Sukuk Al-Musharaka issuance in August 2006.
The Sukuk proceeds will help Alaqaria with funds to commence its $2 billion Shariah-compliant real estate investments strategy over the next two years.
