UAE citizens, residents now able to invest in treasury sukuk

The UAE has made shari'ah-compliant treasury sukuk (T-sukuk), which were previously available only to institutional investors, accessible to all citizens and residents in the UAE, the Emirates News Agency (WAM) has reported.

Retail Sukuk, a new initiative from the UAE Ministry of Finance (MoF), enables individual investors to invest in shari'ah-compliant, government-backed T-sukuk through fractionalised digital investment platforms operated by participating banks in the country.

The initiative seeks to promote financial inclusion and expand the investor base for government financial instruments by enabling citizens and residents to invest easily and securely in line with Islamic principles. It also seeks to stimulate long-term investment in T-sukuk as a secure and sustainable savings tool. 

Retail sukuk are denominated in AED and linked to government-backed T-sukuk already traded in the market and designated for institutional investors. Investments of AED4,000 and up are accepted.

HH Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, First Deputy Ruler of Dubai, Deputy PM and Minister of Finance of the UAE was quoted by WAM: “The Retail Sukuk initiative reflects the UAE’s vision and its leadership’s directives to empower the community and enhance participation in the national development journey through financial policies that prioritise human wellbeing. Launched within the framework of the Year of Community, the initiative opens new horizons for citizens and residents to contribute to shaping the future through secure, government-backed investment instruments.”

He added that the MoF seeks to "transform investment in government bonds into an accessible, comprehensive digital experience, enabling all segments of society to access high-quality financial instruments that were previously limited to institutional investors" with the initiative. "This represents a strategic step towards advancing financial inclusion and promoting a culture of long-term savings, ensuring the sustainability of the UAE’s financial resources and supporting development goals across various sectors,” he added.

Mohamed bin Hadi Al Hussaini, UAE Minister of State for Financial Affairs said: “The Retail Sukuk initiative represents a qualitative leap in the development of government investment instruments, enhancing individual participation in economic growth and providing a direct avenue to contribute to the national development journey. This initiative realises the Ministry of Finance’s vision of building an innovative financial environment that provides secure, sustainable investment solutions that benefit the entire community.”

He added, “The initiative aligns with the objectives of the Year of Community by promoting responsible saving habits and increasing financial awareness across all segments of society. It also reflects the spirit of partnership between the public and private sectors in fostering the values of giving and active economic participation, contributing to building a balanced, sustainable economy that serves future aspirations.”

Details

Investment in retail T-sukuk will be available through participating banks, with the name of the first bank to be announced on 3 November 2025. 

August Sukuk Al-Salam 100% subscribed in Bahrain

The Central Bank of Bahrain (CBB) has announced that the monthly issue of the Sukuk Al-Salam Islamic securities were fully subscribed at 100%. This is issue 208 (BH00012B7P87) of the short-term Sukuk Al-Salam series.

Subscriptions worth BD43 million were received for the issue, which carries a maturity of 91 days. The expected return on the issue, which begins on 22 August 2018 and matures on 21 November 2018, is 4.02% compared to 3.94% for the previous issue on 18 July 2018.

Sukuk Al-Salam are issued by the CBB on behalf of the Bahrain government.

National Bonds announces a 20% increase in regular savers in 2017

National Bonds Corporation, the shari'ah-compliant savings and UAE investments company, has announced a 20% increase in regular savers in line with its commitment to increase financial literacy and happiness in the UAE. The company also reported up to 4% returns for National Bonds savers for a second year in row.

Mohammed Qasim Al Ali, CEO, NBC said: “We are passionate about increasing savings across the UAE and we measure our success on the number of savers year on year. We incentivise customers to save with us through competitive returns and we are very pleased to report an increase in regular saving by 20% in 2017. This is reflective not only of the growing confidence in National Bonds, but also the growing appetite among UAE residents to invest in their future.

"At National Bonds, we are committed to helping UAE residents save and as the latest results highlight, it pays to save with us. In fact, bondholders who have invested with us since inception have seen nearly 52% in total returns to date - a significant return on investment.”

Looking at annual returns, including annual profits and donated rewards, holders of Saving Bonds valued at more than AED50,000 received on average a return of 1.64%, while those with bonds valued at AED150,000 or more benefitted from an average return of 2.43%. Customers who had a balance of over AED350,000 in their accounts were rewarded with an average return of 3.62%.

National Bonds’ term sukuk also reported strong results for customers last year, with returns ranging from 1.75% up to 4% for customers with a three-year term. Additionally, holders of regular saver bonds saw an average annual return of 2.82%.

National Bonds also reported, in line with the overall growth of private wealth in the UAE, an increase to the numbers saving with their Prestige Programme. As private wealth continues in the UAE and wider region, 2017 saw an 8% increase in the account balance of Prestige customers. Interestingly, there was a 23% increase in customers who joined Prestige last year, 5% of which were new to National Bonds.

“Last year was a great year for our business. Not only did we witness an increase in returns for a second consecutive year, but we also witnessed stable growth across our business. In 2017, we remained bullish in our investment strategy, but always with our stakeholders’ interest in mind. This, in turn, produced strong results which we look forward to continuing into 2018,” said Al Ali.

National Bonds’ investment strategy remained robust in 2017, with a continued focus on capital preservation for customers and the long-term economic development of the UAE. Low-risk investments remained a key priority in 2017, with the aim of protecting the interests of bondholders and shareholders. This approach has ensured year-on-year increases in shareholder equity.

An example of successful investment by National Bonds can be seen through its retail arm, National Properties. In 2017, National Bonds delivered the second phase of Motor City Green Community. Also known as Casa Familia Villas, this project quickly became one of Dubai’s most sought-after residential addresses and was completed within the year, two months ahead of schedule.

Other areas of success in 2017 include National Bonds’ commitment to sustainability. Last year, National Bonds signed a deal with Dubai Electricity and Water Authority (DEWA) in Q417 to set up an AED2.5 billion green fund. The ground-breaking fund will be the first major green fund with a dedicated arm for shari'ah-compliant investments. The fund’s aim is to invest in multiple types of projects including renewable energy, retrofitting existing fossil fuel-based energy systems, energy efficiency and balancing technologies between electricity demand and supply.

Al Ali concluded: “This is a clear testament to the company’s robust financial strategy, clear vison for the future, as well as the hard work and dedication of our people. We have a number of exciting launches and investment opportunities in the pipeline and I am personally excited for what 2018 has to offer.”

Indonesia government sukuk breaks Dubai sukuk value record

+Milestone reflects the channelling of global Islamic finance activity and knowhow into Dubai

+Asian and MENA issuers choose Nasdaq Dubai for worldwide visibility and ease of listing

The government of Indonesia has listed two sukuk with a total value of US$3 billion on Nasdaq Dubai. The listings raised the total nominal value of all sukuk listed in Dubai above US$50 billion for the first time, to a global record high of US$52.06 billion. Indonesia’s latest sukuk listings comprise one issuance of US$2 billion and another of US$1 billion.


Of Dubai’s US$52.06 billion in listings, US$49.3 billion are listed on Nasdaq Dubai and US$2.75 billion are listed on Dubai Financial Market (DFM). Nasdaq Dubai announced in July 2015 that it had become the largest exchange for sukuk in the world and has since maintained that position.

MENA region sukuk issuers with Dubai listings include government and private sector entities active in a variety of industries including property, education, leisure, transport, finance, and infrastructure development. Among UAE issuers, Dubai Islamic Bank has the largest sukuk listings, totalling US$4.25 billion.

The Indonesian government is the largest issuer on Nasdaq Dubai, with a total value of US$11.5 billion from eight listings. Other leading issuers include Saudi-based Islamic Development Bank with US$8.5 billion and the government of Hong Kong with US$3 billion.

Dr Robert Pakpahan, Director General of Budget Financing and Risk Management, Ministry of Finance, Indonesia, said: “The channelling of sukuk listings into Dubai reflects the growing collaboration between Islamic finance practitioners based in different parts of the world. By pooling our knowhow and respective traditions, we are creating a more dynamic global industry that better meets the commercial and social needs of everyone who seeks the growth and development of sharia’ah-compliant finance.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: “The rapid expansion of Dubai’s sukuk market is based on intellectual as well as financial input from a wide range of issuers, investors and market participants based in dozens of countries. There is a common desire to come together to achieve new standards of excellence and efficiency and Dubai will further strengthen its role as a facilitator of this process.”

Nasdaq Dubai’s activities to promote the expansion of the sukuk sector include working with IdealRatings, with which it launched benchmark indices that track the performance of global sukuk in October 2016.

Dubai’s growth as the world’s largest sukuk listing centre supports the initiative announced in 2013 by Sheikh Mohammed Bin Rashid Al Maktoum, VP and PM of the UAE and Ruler of Dubai, for the Emirate to become the global capital of the Islamic economy.

Global sukuk issuances reached US$72.9 billion globally in 2016 according to RAM Ratings Services, with Islamic finance assets as a whole valued at more than US$2 trillion. 

Warba Bank celebrates Nasdaq Dubai listing of US$250 million sukuk tranche

Source: Nasdaq Dubai. Celebrating the listing of Warba Bank's sukuk.

Shaheen Al-Ghanem, Chief Executive, Warba Bank, has rung the market-opening bell to celebrate the listing on Nasdaq Dubai of US$250 million perpetual tier 1 Basel III-compliant capital sukuk.

Warba Bank’s sukuk comprises perpetual tier 1 mudarabah capital certificates, non-callable before 14 March 2022, with the initial coupon set at 6.5%. The sukuk listed on Nasdaq Dubai on March 15, 2017.

The sukuk will further strengthen the Kuwaiti bank's capital base and support the bank’s continued growth and development as well as its commitment to Islamic finance. Established in 2010, Warba Bank is expanding its activities in the full range of banking and investment services in Kuwait in compliance with shari’ah principles.

The sukuk reflects the accelerating growth in financial markets ties between the UAE and Kuwait. It also reinforces Nasdaq Dubai’s status as the global leader for sukuk listings, with a total nominal value of US$46.31 billion from issuers in the MENA region and beyond.

The bell-ringing ceremony took place in the presence of HE Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre (DIEDC), and Chairman of Dubai Financial Market (DFM), and senior representatives of Warba Bank, as well as Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai and Hamed Ali, Chief Executive of Nasdaq Dubai.

Al-Ghanem said: “The success of our sukuk in attracting investors from Kuwait, the MENA region and beyond reflects the confidence of the market in Warba Bank’s strategy for growth and development across all our business areas including investment, treasury, corporate banking and retail banking. Nasdaq Dubai’s first-class listing environment, including its close links with regional and global investors as well as its international regulatory standards, provides important support for this capital-raising initiative.”

HE Essa said: “Warba Banks’s choice of Dubai for its sukuk listing further strengthens the collaboration between the capital markets of Kuwait and the UAE, which provides attractive opportunities to issuers and investors as well as supporting wider economic relationships within the GCC. The listing also strengthens the growth of Dubai as the global capital of the Islamic economy under the initiative launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE VP and PM, and ruler of Dubai.”

Al Fahim, Chairman of Nasdaq Dubai, said: “Drawing on our unrivalled network of relationships with regional and international issuers, advisers and investors in the Islamic capital markets, Nasdaq Dubai will expand as a centre for listing sukuk and other Islamic products. We will further streamline and enhance our listing processes to meet the commercial needs of issuers.”

Chief Executive Hamed said: “As one of Kuwait’s and the region’s most active and prominent financial institutions, Al Warba Bank is a very significant addition to Dubai’s sukuk market. We are delighted to support the bank’s expansion across a range of activities by facilitating its capital raising needs and strengthening its links with investors, including through the high visibility that our listing platform provides across the region and internationally. We are in contact with a number of leading Kuwait companies and institutions and look forward to providing them with an effective listing venue that will assist their development strategies.”

Warba Bank operates through corporate, retail, treasury and investment business functions, offering a variety of banking and investment products as well as financial services to corporate and retail customers.

Liquidity Management through Sukuk discusses challenges and emerging solutions

Thomson Reuters, the provider of information for businesses and professionals, has released the Liquidity Management through Sukuk teaser report in partnership with the Dubai Islamic Economy Development Centre (DIEDC) and in collaboration with National Bonds Corporation (NBC) at the Global Islamic Economy Summit (GIES 2016).

The report discusses the key challenges facing liquidity management in Islamic finance and highlights some of the current existing solutions to overcome these issues. The full version of the report will be released later this year.

According to the report, few instruments have been able to meet both the industry’s needs and its stakeholders’ full expectations. As a result, Islamic banks in the GCC today hold 9% of their assets in cash and equivalents and 10% in placements with other financial institutions. Islamic banks currently place liquid funds in short-term instruments such as commodity murabahah that shari'ah rules have deemed non-tradable in secondary markets. Many shari'ah experts had hoped they would be temporary solutions used in limited contexts where no other instruments could be developed, but lacking alternatives, they have instead become widely adopted in the industry.

New strategies to meet the liquidity management and personal financing needs of Islamic banks and Islamic windows at conventional banks are being developed. One such product is the National Bonds Sukuk Trading Platform, which uses assets in the local economy to structure shari'ah-compliant consumer financing.

Abdulla Mohammed Al Awar, CEO, Dubai Islamic Economy Development Centre, said: “Since the launch of our leadership’s Dubai: Capital of Islamic Economy vision, we have been working with our stakeholders and strategic partners towards developing Islamic finance instruments and reinforcing the significant role of existing instruments such as sukuk in the growth of Islamic finance. As part of our efforts, we have also been supporting studies and researches that catalyse the development of the Islamic economy ecosystem.

“This report, which articulates such efforts, offers a detailed study on liquidity management through sukuk and highlights opportunities to incentivise the growth of Islamic finance and eventually facilitate the development of related sectors. We are confident this report will be treated as an authentic reference point for all stakeholders engaged in the growth of Dubai as the capital of Islamic economy.”

Mohammed Qasim Al Ali, CEO, National Bonds Corporation said: “In line with our strategy to nurture financial literacy in the UAE and offer efficient low-risk financial products, we are pleased to contribute to this report that provides the answer to a crucial question related to the efficiency of liquidity and stability of the financial sector as a whole. Moreover the report highlights the benefits of the significant role of the sukuk platform in ensuring that liquidity and financing fulfil their main role through incentivising economic growth and resolving financial challenges faced by SMEs and business leaders - while avoiding the risks that go hand in hand with conventional loans.”

Nadim Najjar, Managing Director, Middle East and North Africa, Thomson Reuters said, “The Liquidity Management through Sukuk teaser is a highly engaging and dynamic study that inspires and excites Islamic finance stakeholders and professionals to assess the current liquidity management landscape and challenges. The report also provides a comprehensive study on recent trends and developments in Islamic finance and sukuk in the GCC region and beyond.”


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DP World celebrates sukuk listing with market-opening bell ceremony

Source: Nasdaq Dubai. Sultan Ahmed Bin Sulayem, Group Chairman and CEO of global trade enabler DP World, rang the market-opening bell end-June to celebrate the listing on Nasdaq Dubai of a US$1.2 billion sukuk. The bell-ringing ceremony was held in the presence of His Excellency Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre (DIEDC), and Chairman of Dubai Financial Market (DFM); Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai; and Hamed Ali, Chief Executive of Nasdaq Dubai.

Sultan Ahmed Bin Sulayem, Group Chairman and CEO of global trade enabler DP World, has rung the market-opening bell to celebrate the listing on Nasdaq Dubai of a US$1.2 billion sukuk. DP World’s sukuk listed on Nasdaq Dubai on June 1, 2016. It is the company’s fourth debt listing on the exchange, reinforcing Dubai’s status as the global leader for Islamic bond listings, with a total nominal value of US$44.56 billion.

Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, said: “As the international financial exchange serving the Middle East, Nasdaq Dubai is an excellent listing venue to support the global visibility of our sukuk. Our issuance received strong investor demand from around the world, including the US and Europe as well as our own region, underlining the market’s confidence in our continuing development and growth as a leading trade enabler connecting marine and inland terminals, free zones and logistics for the benefit of economies around the world.

“Our sukuk listing fits with the vision of our leaders to position Dubai as the capital of the Islamic economy globally. The demand for it illustrates the positive outlook on our strategic growth and confidence in the strength of our global network across six continents.”

HE Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre (DIEDC), and Chairman of Dubai Financial Market (DFM), said: “DP World’s decision to choose Nasdaq Dubai for its listing highlights the growth of the Sukuk sector in the Emirate, accelerating the expansion of Dubai as the global capital of Islamic economy under the initiative launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President, Prime Minster and Ruler of Dubai. Dubai provides unrivalled expertise across all aspects of sukuk activity.”

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “Our Islamic capital markets framework is purpose built to support leading companies such as DP World that require a high profile platform for their securities, within a robust regulatory environment. We look forward to welcoming many more UAE, regional and international sukuk issuers as the sector continues to expand as an attractive tool for enterprises to raise capital.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: “This listing by one of Dubai’s most prominent international enterprises reflects the emirate’s continuing expansion as a hub for attracting investors from around the world. Nasdaq Dubai will further enhance its listing infrastructure and procedures, to ensure streamlined access to the exchange for issuers of diverse asset classes and continuing support for them after listing.”

Noor Bank rings market-opening bell at Nasdaq Dubai to mark listing of US$500 million sukuk

Source: Nasdaq Dubai. Hussain Al Qemzi, CEO, Noor Bank rings the market-opening bell to celebrate the listing of Noor Bank’s US$500 million debut Tier 1 sukuk on Nasdaq Dubai. The bell-ringing ceremony took place in the presence of His Excellency Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre (DIEDC), and Chairman of Dubai Financial Market (DFM); Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai; and Hamed Ali, Chief Executive of Nasdaq Dubai.

• 11th sukuk listing in Dubai this year reflects active market for issuers and investors
• Listing reinforces Dubai’s role as the global capital of Islamic economy

Hussain Al Qemzi, CEO of Noor Bank, one of the fastest growing Islamic banks in the region, has rung the market-opening bell to celebrate the listing of Noor Bank’s US$500 million debut Tier 1 Sukuk on Nasdaq Dubai. The listing was the 11th sukuk listing in Dubai this year, as well as the first perpetual tier 1 Sukuk issued this year from the UAE. The total nominal value of listings in Dubai has reached US$44.56 billion, demonstrating the robust growth Dubai has achieved as the leading global centre for sukuk listings.

HE Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of the Dubai Islamic Economy Development Centre (DIEDC) and Chairman of Dubai Financial Market (DFM), said: “The successful issuance of this sukuk by a leading UAE bank, followed by its listing on Dubai’s international exchange infrastructure, demonstrates Dubai’s excellence across all aspects of the Islamic bond sector. The Emirate will continue to strengthen its expertise in this field in line with the growth of Dubai as the global capital of the Islamic economy under the initiative launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minster, and Ruler of Dubai.”

Hussain Al Qemzi, CEO, Noor Bank, said: “We are delighted with the outcome of our debut Tier 1 issuance, which witnessed strong investor demand in the international capital markets. Our listing on Nasdaq Dubai, an international financial exchange, provides the issuance with global visibility and internationally recognised regulatory architecture. Through this issuance, we will significantly boost our capital ratios to further support the future balance sheet growth of the bank.”

The perpetual tier 1 sukuk listed on Nasdaq Dubai on June 2, 2016. The listing follows Noor Bank’s inaugural US$500 million senior unsecured sukuk which was listed on the exchange in April 2015.

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: "The issuance and listing of Noor Bank’s latest sukuk provides further evidence that activity in the Islamic bond market is strong, as a result of significant issuer appetite for capital and investor demand for well structured Islamic products. Nasdaq Dubai will further enhance its infrastructure and procedures in order to provide a competitive listing environment than meets issuers’ changing requirements.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: "We are in discussion with a substantial number of potential sukuk issuers who wish to list their securities on the exchange in coming months, to benefit from the high profile and regulatory excellence that it provides. As the Islamic capital markets expand and develop both in the region and internationally, we are preparing to introduce further initiatives and innovation in a variety of asset classes.”

MARC rates TNB Northern Energy's sukuk as AAAIS

MARC has affirmed its AAA_IS rating on TNB Northern Energy's Islamic securities (sukuk) of RM1.625 billion with a stable outlook.

TNB Northern Energy was established to finance and develop a 1,071.43-megawatt combined-cycle gas turbine power plant in Seberang Perai Tengah, Penang, under a 21-year power purchase agreement (PPA) with offtaker Tenaga Nasional (TNB). TNB Northern Energy is 100% owned by TNB Prai which is itself a fully-owned TNB subsidiary.

The rating and outlook are equalised with those of TNB Northern Energy’s ultimate parent TNB, on which MARC currently has a senior unsecured rating of AAA/Stable. The rating equalisation is based on TNB’s commitment in the form of an unconditional and irrevocable project completion support guarantee and post-completion rolling guarantee in favour of sukuk holders. MARC’s assessment is further underpinned by TNB’s undertaking to maintain full ownership of TNB Northern Energy in addition to the operational proximity and financial linkages between the two entities.

The power plant project achieved full commercial operation date (COD) on February 20, 2016, following a 50-day delay from the original scheduled COD. The delay, which was attributed to design issues and defects encountered during the commissioning phase, has resulted in liquidated damages (LD) of RM32.1 million payable to TNB. MARC notes that TNB Northern Energy will claim a LD payment of RM59.6 million from the engineering, procurement and construction (EPC) contractor, Samsung C&T KL. The delay, coupled with the weakening ringgit, has led to a 3.9% increase above the original project cost budget to RM2,587.3 million at completion. The increase, however, remains well within the project sponsor’s completion support guarantee of 10% or RM249 million.

The plant’s operations and maintenance (O&M) duties are carried out by related entity TNB Repair & Maintenance (TNB Remaco) under a 21-year O&M agreement. The rating agency notes that the LD provision under the O&M agreement is not sufficient to recover any revenue losses given that TNB Remaco is only liable for up to 30% in capacity payment reductions and non-reimbursable fuel cost in the event of breaches in the contracted average availability target, net output capacity and net heat rate. Nonetheless, O&M risk is mitigated through the availability of plant warranty and long-term turbine maintenance support provided by Samsung and Siemens respectively. With regard to fuel supply risk, the long-term gas supply agreement with Petroliam Nasional addresses this concern.

The project revenue in the form of availability capacity and energy payments subject to meeting performance standards under the PPA provides sufficient coverage to TNB Northern Energy’s fairly flat debt servicing profile. The company is expected to achieve an average finance service cover ratio (FSCR) without cash balances of 1.31 times during the sukuk tenure. MARC views TNB Northern Energy’s finance service ability as adequate even after taking into account the COD delay which has led the projected cash balance being revised downward by RM4 million to RM33 million as at December 31, 2016. TNB Northern Energy’s designated account balances of RM118 million as at April 30, 2016 is well above the finance service obligations of RM70 million for 2016.

MARC’s sensitivity analysis reveals that the project coverage is only able to withstand mild stresses due to the absence of cash build-up. TNB Northern Energy is expected to return about RM834 million of capital to its shareholders during the sukuk tenure subject to meeting a distribution finance service cover ratio of 1.5 times. The rating agency expects the project sponsor’s rolling guarantee to act as a reliable liquidity source during periods of weaker-than-projected cash flows.

The stable outlook mirrors the outlook on TNB's senior unsecured rating. Any changes in TNB Northern Energy's rating and/or outlook would be primarily driven by a revision of TNB's rating and/or outlook.

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Read the Suroor Asia blog post about MARC's analysis of TNB Western Energy's sukuk 

MARC confirms rating of AAAIS on Islamic Development Bank's sukuk wakalah

MARC has assigned a final rating of AAA_IS to Islamic Development Bank’s (IsDB) proposed sukuk wakalah (sukuk) issuance of up to RM400 million by Tadamun Services (Tadamun), a trust established by IsDB for the purpose of issuing the sukuk. The outlook on the rating is stable.

Upon review of the final documentation of the issuance, MARC is satisfied that the terms and conditions of the sukuk have not changed in any material way from the draft documentation on which the earlier preliminary rating of AAAIS was based.

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Read the Suroor Asia blog post about MARC's ratings for the IsDB

MARC decides Senai Desaru Expressway rating remains BBB-IS

MARC has affirmed its rating of BBB-IS on Senai-Desaru Expressway’s (SDEB's) RM1.89 billion Islamic Medium-Term Notes (Restructured Sukuk) Programme with a stable outlook.

The rating incorporates the improving traffic volume on the expressway and the accommodative payment structure under the programme, which provides SDEB with headroom to improve its cash flow coverage. Under the restructured sukuk, initiated in 2014, the step-up profit rate structure eases liquidity pressure in the early years of the programme’s tenure, allowing for cash buildup to meet its back-ended principal obligations. In addition, extension of the concession to 2053 from the initial 2038 allows for upside benefit from traffic volume growth generated from planned developments in the expressway’s service areas. The rating also takes into account SDEB’s continued weak credit profile, characterised by persistent negative shareholders’ funds.

MARC notes that total annual traffic volume on the Senai-Pasir Gudang-Desaru Expressway (SDE), which comprises a 77km tolled inter-urban expressway between Senai and Desaru with a connecting highway to Pasir Gudang, increased 17.6% year-on-year (YoY) to 292.4 million passenger car unit-kilometres (pcu-km). The growth was 10.6% higher than the projected traffic volume. The improvement, despite a toll hike in October 2015, has been attributed to increased development activities along the expressway, widening works on the toll-free alternative, and the ongoing projects in Pengerang, where the multi-billion ringgit RAPID project is in progress. Given the actual traffic CAGR of 6.9% over the last three years, traffic volume growth would need to at least sustain to meet traffic projections: the SDE is projected to achieve CAGR of 8.3% from 2016 to 2022, normalising to 7.4% until 2038 before declining to 5%.

The sensitivity analysis on SDEB’s cash flow projections demonstrates that the company can withstand a drop of 7.4% in traffic volume from the base case projections throughout the sukuk tenure and a higher-than-expected operating cost of 4.8% per annum. MARC notes that in the absence of toll hikes and no government compensations given, SDEB’s debt servicing ability would come under pressure starting in FY17. The sensitivity results also show that delays in the RAPID project would weigh on SDEB’s traffic volume and, consequently its cash flows to meet principal repayment of the sukuk, which commences by FY2039.

The back-ended amortisation structure provides SDEB headroom to strengthen its liquidity position in order to maintain compliance with the covenanted finance service cover ratio (FSCR) of 1.25 times, a requirement that commences from June 30, 2018 and runs throughout the remaining tenure of the restructured sukuk.

As at 8MFY2016, the company’s cash and cash balances stood at a low RM26.6 million relative to its financial obligations. MARC remains concerned on SDEB’s sizeable obligations under the concession agreement to widen and upgrade the Cahaya Baru-Pasir Gudang and Ulu Tiram-Cahaya Baru stretches in 2016 and 2017 respectively. However, due to the low usage of the aforementioned stretches, SDEB is seeking a deferment from the government as it will need to incur costs of about RM373.6 million to carry out the upgrading works. The sukuk holders have given SDEB an extension until June 30, 2016 to obtain approval, failing which a technical breach would occur.

The stable outlook reflects SDEB achieving sustainable traffic performance and timely receipt of government compensations as demonstrated in the recent years. Any revision to the rating and/or outlook would depend on the outcome of deferment on the upgrading works or any material deviations from the assumptions set out in the projections.

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RAM Ratings assigns final ratings to RCE-sponsored Tranche 1 sukuk

RAM Ratings has assigned final AAA/Stable and AA3/Stable ratings to Al Dzahab Assets' (the Issuer) RM95 million class A sukuk and RM25 million class B sukuk, respectively. This is the first issuance under Al Dzahab’s RM900 million sukuk murabahah asset-backed securitisation programme (the programme).

The issuance will be collateralised by personal-financing (PF) facilities originated by RCE Marketing (RCEM) through its business partners and extended to civil servants. These facilities are repaid via non-discretionary salary deductions processed by the Accountant General's Department and Angkatan Koperasi Kebangsaan Malaysia, thereby substantially insulating the transaction from the credit risks of the borrowers as long as they remain in active service.

RAM Ratings' cashflow assessment indicates that the underlying portfolio will be able to meet full and timely payment of the financial obligations of Tranche 1 under respective “AAA stress” and “AA3 stress” scenarios for the class A and class B sukuk. The class A sukuk and class B sukuk will be backed by receivables with an outstanding principal value of RM148.6 million and RM3.4 million of cash balances respectively, translating into corresponding over-collateralisation ratios of 60% and 26.66%.

Given the underlying portfolio’s weighted-average (WA) seasoning of only 1.21 years against a WA original tenure of 9.74 years, however, the actual performance of the portfolio as it seasons may deviate from our cashflow assumptions. Furthermore, the historical data reflect a benign period for the industry as a result of regulatory changes.

The transaction structure prioritises the financial obligations in respect of the class A and class B sukuk. Profit on the unrated class C sukuk are payable only after the full redemption of the rated classes. The minimum required balance in the Finance Service Reserve Account can only be utilised to top up any shortfall in meeting the profit obligations vis-à-vis the rated sukuk. In relation to Tranche 1, the issuer will pay fixed servicer fees without any servicer commission or bonus.

RAM Ratings believes that RCEM (as the servicer) is sufficiently “incentivised” to uphold its responsibilities in relation to Tranche 1, as the programme remains a long-term source of funding for the RCE Group. RCEM has been providing and servicing PF facilities for more than 10 years, and this transaction marks its fourth venture into the private debt market, which gives confidence to the conclusion.

Al Dzahab is a special-purpose vehicle incorporated to undertake the securitisation of receivables originated through the business partners of RCEM. Under the programme, the issuer will, from time to time, issue sukuk to fund its acquisition of PF portfolios. Stop-issuance trigger events prohibit further issuance under the programme should the servicer’s ability to perform its obligations – including servicing the PF facilities – become impaired.

Noor Bank's sukuk lists on Nasdaq Dubai

Nasdaq Dubai has welcomed the listing today of a US$500 million dollar tranche of sukuk by Noor Bank. It was the third sukuk listing in quick succession on the Middle East’s international exchange, following the listings of a US$1.2 billion sukuk by DP World and a US$750 million sukuk by Emirates Islamic.

Noor Bank’s sukuk is listed solely on Nasdaq Dubai and is the 11th sukuk to list on the exchange this year, underlining Dubai’s stature as the leading venue for Islamic bonds as the asset class grows in popularity around the world among issuers and investors.

The total nominal value of the 57 sukuk currently listed in Dubai is now US$44.56 billion, the largest sum of any centre in the world.

Hamed Ali, Chief Executive of Nasdaq Dubai, said: “Dubai provides issuers with a listing framework that is highly responsive to their commercial needs, combined with unrivalled visibility to regional and international investors. Our successful hosting of Noor Bank’s sukuk as well as other recent listings underlines our commitment to helping the Islamic bond sector expand and prosper.”

International issuers that have listed sukuk on Nasdaq Dubai earlier this year include Boubyan Bank of Kuwait, as well as Islamic Development Bank and the government of Indonesia.

Interested?

Read the Suroor Asia blog posts about the Indonesian government's sukuk, Boubyan Bank's sukuk and Noor Bank's pricing of its sukuk

MARC assigns AA-IS rating to Lebuhraya DUKE Fasa 3's sukuk wakalah

MARC has assigned a rating of AA-IS to toll concessionaire Lebuhraya DUKE Fasa 3 (DUKE 3) proposed RM3.64 billion sukuk wakalah with a stable outlook. DUKE 3 was incorporated by Ekovest to undertake the design, construction, financing, operations and maintenance of DUKE Phase 3 expressway under a concession agreement with the Malaysian government in January, 2016. The concession is for a period of 53 years and six months.

The 32.1km expressway is to be elevated and link the Middle Ring Road 2 (MRR2) at Wangsa Maju to the Kerinchi Link on the Federal Highway in Kuala Lumpur.

The proceeds from the sukuk will part fund the estimated RM5.05 billion project cost; the remaining funding will come from a RM560 million interest-free government reimbursable interest assistance (RIA) and RM850 million equity. The proposed debt and equity mix of 83:17 for the Duke Phase 3 project is in line with similar MARC-rated project financing structures. The rating on the proposed sukuk wakalah incorporates the adequate cash flow coverage, the strong track record of the project sponsor, Ekovest, and the importance of the expressway in the transportation development plan for Kuala Lumpur.

The rating is weighed down by the moderate likelihood of lower-than-projected traffic growth arising mainly from competitive alternative mode of transportation. In addition, toll pricing and possible future toll hike deferments as well as the potential impact from the incremental financial obligations on the RIA may pose some risks to the project cash flow.

MARC views the construction risk on the DUKE Phase 3 project to be largely mitigated by the track record of project sponsor Ekovest, which had completed the DUKE Phase 1 project and is currently undertaking the DUKE Phase 2 project that is scheduled for completion by end-2016. A fixed sum turnkey engineering, procurement and construction (EPC) contract amounting to RM3.96 billion has been awarded to Ekovest. Given that DUKE Phase 3’s elevated alignment will pass through the densely populated areas of Chan Sow Lin, Pandan Indah and Wangsa Maju, the construction could be challenging relative to Ekovest’s other projects. Nonetheless, the construction period of 42 months is considered reasonable, while comfort is also drawn from the liquidated ascertained damages provisions under the EPC contract and the progressive buildup of 5% of the total construction cost (or RM184.5 million) over the first 18 months of the construction period to mitigate the risk of construction cost overruns. The buildup funds will be progressively carved-out from the EPC’s gross contract billings as security for the sukuk holders during construction phase.

MARC notes that as 96.5% of the 553.3 acres of land needed for the expressway are either on existing road reserves or have been acquired, land acquisition risk is considered low. The balance of the 19.6 acres is privately held, of which 6.9 acres (13 lots) in the Chan Sow Lin area are in the early stages of negotiation while the rest are at fairly advanced stages. The sizeable government funding set aside for the purchase of land parcels in the Chan Sow Lin area and the limited number of parcels involved minimise the risk relating to the land acquisition in this area.

The rating agency views that the traffic flow on DUKE Phase 3, upon its expected completion in 2020, could be affected by the availability of alternative routes and Mass Rapid Transit (MRT) system. This notwithstanding, the elevated expressway’s direct connectivity between the heavily congested MRR2 and Federal Highway as well as to other important major toll roads in the Klang Valley mitigates the risk of underutilisation. Based on the traffic study by Perunding Trafik Klasik,
DUKE Phase 3 is expected to achieve a cumulative average daily traffic of 99,840 vehicles from its four toll plazas when tolling operations begin on January 1, 2020. MARC notes that DUKE Phase 3’s relatively steep traffic growth rates in the first five years are supported by low opening traffic volume and the prevailing heavy congestion along competing routes. Excluding the traffic flow during the ramp-up period (2020-2024), traffic volume is expected to grow by a CAGR of 3.2% p.a.

DUKE 3 is projected to achieve minimum and average predistribution finance service cover ratio (FSCR) with cash balances of 2.13 times and 2.29 times respectively during the sukuk tenure. The rating agency notes that the thin project coverage levels are mainly due to the RIA loan repayment that limits DUKE 3 from building up its liquidity reserves at higher levels. The fixed repayment on the RIA will commence in 2023 together with the amortisation of the sukuk, subject to a distribution FSCR of 2.00 times. Nonetheless, the RIA repayments can be deferred (subject to an interest of 8% per annum) and has lower security ranking compared to the sukuk holders.

MARC’s sensitivity analysis reveals that the project cash flow can withstand moderate stresses arising from construction cost overruns and traffic underperformance. The project cash flow is vulnerable to a breach in the minimum FSCR covenant of 1.50 times in 2022 should the construction cost overrun exceed 10%. DUKE 3’s finance service ability would also come under pressure in the event of a 20% reduction in the overall projected traffic volume. Under these stressed scenarios, DUKE 3 is expected to defer most of its debt obligations on the RIA to protect sukuk holders from a further weakening of the cash flow coverage. Sukuk holders are protected from prolonged construction delay of up to 18 months as the prefunded finance service reserve is sufficient to cover the first three semi-annual profit payments.

The stable outlook incorporates MARC’s expectation that the project sponsor will adhere to the predetermined capital commitment under the financing structure and the construction of DUKE Phase 3 will progress on schedule and within budget.

Interested?

Refer to the MARC Definitive Ratings Guide for rating definitions (PDF, page 54)

DIB's latest sukuk brings its listings on Nasdaq Dubai to US$3.25 billion

• Bank’s sukuk listings on Nasdaq Dubai now total US$3.25 billion
• Listing reinforces Dubai’s position as the international leader for listed sukuk

Dubai Islamic Bank (DIB) has listed its latest sukuk, with a value of US$500 million, on Nasdaq Dubai. This brings DIB’s total sukuk listings on the region’s international exchange to US$3.25 billion, underlining the rapid expansion of Dubai as the global capital of the Islamic economy.

Dr Adnan Chilwan, Group Chief Executive Officer, DIB said: “As the leading Islamic bank in the country, we are committed to the economic development in Dubai and to promote the emirate’s growth and success in the field of Islamic finance. Given the challenging market conditions, it was critical to have strong credit come in and successfully close a deal. As such, this transaction effectively marks the re-opening of the GCC financial sector debt capital markets after a hiatus of four months.

"Nasdaq Dubai provides us with both a well-regulated listing framework and excellent links to investors in our own region and globally as we continue to expand the scope of our investor base in the capital markets arena.”

HE Essa Kazim, Governor of Dubai International Financial Centre (DIFC) and Secretary General of Dubai Islamic Economy Development Centre (DIEDC), said: “Through their location in the heart of the Muslim world, Dubai’s Islamic capital markets are uniquely placed to expand in all aspects including issuance and listing. DIB’s prominence in both activities reinforces Dubai’s status as the leading centre for sukuk and its growth as the global capital of the Islamic economy, under the initiative launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minster, and Ruler of Dubai.”

Following a total of seven sukuk listings this year by regional and international issuers, the total value of sukuk currently listed in Dubai is now US$42.61 billion, the largest for any listing centre in the world.

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “As a pioneer of Islamic finance and pillar of Dubai’s growth and prosperity, DIB is a key issuer on Nasdaq Dubai. Through their close cooperation, a range of government and semi-government institutions in Dubai as well as private companies are underpinning the growth of the shari’ah-compliant financial markets in the region and internationally.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: “The sukuk sector will continue to be a core focus for Nasdaq Dubai as we look forward to further listings in 2016 and beyond from a range of issuers. We are also developing further initiatives in the Islamic capital markets to provide innovative services designed to meet the evolving needs of market participants.”

DIB’s latest US$500 million sukuk listed on the exchange on March 31, 2016. DIB listed one sukuk in 2013 and two in 2015.

posted from Bloggeroid

Boubyan Bank planning sukuk issuance in 2016

Boubyan Bank, an Islamic bank in Kuwait, has recorded a profit growth of 23% in Q116, amounting to net profits of KD 9.1 million.

Adel Abdul Wahab Al-Majed, the Bank’s Vice Chairman and CEO, said that this growth was achieved despite a highly competitive environment. Al-Majed also stated that the bank will issue sukuk this year to enhance the capital base through CET1 instruments as per Basel III instructions on a mudarabah basis.

posted from Bloggeroid

Nasdaq Dubai announces two sukuk listings from the Indonesian government

• Total sukuk listings on the exchange by Indonesian government reach US$8.5 billion
• Market’s expansion supports Dubai’s growth as global capital of Islamic economy

Nasdaq Dubai has welcomed the listing of two sukuk issued by the government of Indonesia with a total value of US$2.5 billion. This brings the total nominal value of sukuk currently listed on Dubai’s exchanges to US$42.31 billion, strengthening its position as the largest centre globally for Islamic bond listings.

The listings support the growth of Dubai as the global capital of the Islamic economy under the initiative launched by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minster, and Ruler of Dubai.

Bambang Bodjonegoro, the Indonesian Minister of Finance, said: “Our latest sukuk issuances confirm Indonesia’s commitment to supporting the Islamic capital markets, and our choice of Nasdaq Dubai for listing provides us with close links to regional and international investors. We look forward to issuing further sukuk in due course under our 2012 Trust Certificate Issuance Program, providing further sources for government infrastructure development financing as well as new opportunities for investors around the world.”

His Excellency Essa Kazim, Governor of Dubai International Financial Centre (DIFC) and Secretary General of Dubai Islamic Economy Development Centre (DIEDC), said: “These substantial listings confirm the international reach of Dubai’s Islamic capital markets as the emirate accelerates its expansion as the gobal capital of the Islamic economy. Our expanding relationship with Indonesia, the world’s most populous Muslim country, strengthens the development of the financial infrastructure of both countries for the benefit of their economies and citizens.”

The latest two sukuk listings by the Indonesian government took place on March 31, 2016. They bring its total sukuk listings on the exchange to US$8.5 billion, following its listing last year of four sukuk with a total nominal value of US$6 billion. 

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “The exchange welcomes sukuk listings from around the world by sovereign issuers as well as multilateral organisations and private entities active in a wide range of industries. As the sukuk sector expands further we will support its development in every way possible making use of the Islamic capital markets knowledge and expertise available in the UAE.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: " We are committed to providing a responsive and flexible listing framework that meets the needs of sukuk issuers, including enhanced listing procedures that meet their commercial needs. We aim to support our issuers on every level, from regulatory excellence to administrative reliability and regional and global visibility.”

Nasdaq Dubai is the largest exchange in the world for sukuk listings at US$39.56 billion. The Dubai financial market has sukuk listings of US$2.75 billion.

APICORP rings market-opening bell at Nasdaq Dubai

Source: Nasdaq Dubai. Dr Aabed Al Saadoun, Chairman of the Arab Petroleum Investments Corporation (APICORP), has rung the market-opening bell to celebrate the listing of a US$500 million sukuk on Nasdaq Dubai. The bell-ringing ceremony was attended by His Excellency Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre (DIEDC), and Chairman of Dubai Financial Market (DFM); Dr Raed Al Rayes, Deputy Chief Executive and General Manager, APICORP, Hesham Farid, Head of Treasury & Capital Markets, APICORP; and Hamed Ali, Chief Executive of Nasdaq Dubai.

• Listing reinforces Dubai’s position as the global leader for listed sukuk at US$37.81 billion 
• Funds raised by the multilateral development bank will support investment in the Arab energy sector

Dr Aabed Al Saadoun, Chairman of the Arab Petroleum Investments Corporation (APICORP), has rung the market-opening bell to celebrate the listing of a US$500 million sukuk on Nasdaq Dubai. The total nominal value of sukuk currently listed in Dubai has now reached US$37.81 billion, reinforcing its position as the largest centre in the world for Islamic bond listings.

APICORP’s sukuk listed on Nasdaq Dubai on January 18, 2016. The sukuk was the first to be issued under a US$3 billion sukuk programme that the bank announced in July 2015, aimed at diversifying its funding sources and reducing its overall cost of financing.

Dr Aabed Al Saadoun, Chairman of APICORP, said: “A listing on one of the Middle East’s premier financial exchanges provides our inaugural sukuk with global and regional visibility, together with world class regulation. As a multilateral development bank dedicated to supporting the energy sector with priority given to Arab joint ventures that benefit the members’ states, we look forward to making further use of Islamic financing instruments to fund our initiatives for the benefit of Arab economies.”

HE Essa Kazim, Governor of DIFC, Secretary General of DIEDC and Chairman of DFM, said: “This listing by a regional bank that is active in many countries demonstrates the success of Dubai’s capital markets in providing a platform for issuers well beyond the UAE. APICORP’s sukuk underlines Dubai’s stature as the leading centre in the world for sukuk listings and its growth as the global capital of Islamic economy, under the initiative launched in 2013 by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minster, and Ruler of Dubai.”

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “The exchange is committed to providing all our sukuk issuers with a well regulated listing infrastructure that exceeds global standards, providing confidence to investors in the securities. We will continue to build our sukuk market through 2016 and beyond with further issuances from the UAE, the MENA region, and international companies and institutions.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: “We will further enhance our response times and procedures to meet the commercial needs of sukuk issuers in a dynamic market environment. Our location in Dubai positions the exchange at the heart of an expert community of Islamic finance specialists who are driving expansion and innovation in the sukuk and wider Islamic finance sector.”

BPAM's 2015 Malaysia Bond and Sukuk Almanac now available

Bond Pricing Agency Malaysia (BPAM) has released its 2015 Malaysia Bond and Sukuk Almanac, which provides detailed profiles on Ringgit bond issuers and reports on the Malaysian bond and sukuk market.

In a separate fact file, July, September and November 2016 will be peak months for bonds and sukuk maturities in Malaysia, BPAM said. Maturities will be the highest for Islamic bonds in November 2016, far surpassing maturities for conventional bonds.

Interested?

Download the 2013, 2014 and 2015 editions of the almanac

Issue No. 126 of CBB's Sukuk Al-Ijara oversubscribed by 220%

The Central Bank of Bahrain (CBB) has announced that the monthly issue of the short-term Islamic leasing bonds, Sukuk Al-Ijara, has been oversubscribed by 220%.

Subscriptions worth BD57.2 million were received for the BD26 million issue, which carries a maturity of 182 days. The expected return on the issue, which begins on 11 February 2016 and matures on 11 August 2016, is 2.14% compared to 2% for the previous issue on 14 January 2015.

Sukuk Al-Ijara are issued by the CBB on behalf of the Government of the Kingdom of Bahrain.

This is issue No.126 (BH0005L57493) of the short-term Sukuk Al-Ijara series.