ADIB Global Sukuk Fund launch declared a success

Abu Dhabi Islamic Bank (ADIB) has raised over US$160 M through its new flagship fund, the ADIB Global Sukuk Fund.

Launched in October 2021, the fund offers a diversified portfolio that captures the opportunities available within the shari'ah-compliant universe of sovereign, quasi-sovereign, financial institutions and corporate sukuk, issued locally, regionally, as well as globally. It is targeted at investors seeking regular returns above prevailing cash rates over a medium to long-term investment period.

The successful raise demonstrates significant market appetite for high-quality shari'ah-compliant investment products, ADIB said. Michael Gregory Davis, ADIB Global Head of Wholesale Banking Groups, said: “We are extremely pleased with the strong demand received for the ADIB Global Sukuk Fund during its initial marketing phase which led to raising more than US$160 M at its first closing.

"Our clients are particularly attracted to the fund’s investment grade average rating, low volatility, relatively short duration, the option for regular attractive quarterly income distribution as well as its daily liquidity. We believe the fund’s compelling investment proposition will help us to grow the fund further and to establish it as one of the leading global sukuk funds in the market.”

Saudi Real Estate Refinance COmpany issues sukuk to support housing market lenders

The Saudi Real Estate Refinance Company (SRC) has issued sukuk worth SAR2 billion to support lenders in the housing market, with the aim to further expand home ownership. The offer was guaranteed by KSA's Ministry of Finance.

The 10-year sukuk has a fixed profit rate of 3.04% and was marketed to Saudi institutional investors. The offer was oversubscribed 2.5 times.

Fabrice Susini, CEO of SRC, which is wholly owned by the Public Investment Fund (PIF), said: "The very positive reception in the market for our sukuk demonstrates strong confidence in the Saudi housing market and economy, and robust investor support for our business model as home ownership continues to increase. The funding raised will enable us to expand our relationships with home finance lenders, as Saudi Arabia moves closer to its target of achieving 70% home ownership among Saudi nationals by 2030."

Susini added: "Our latest sukuk issuance also adds further depth to the Saudi fixed income market in line with the goals of the Financial Sector Development Program (FSDP) as part of Vision 2030."

SRC's new sukuk was issued under its SAR10 billion Sukuk Programme, under which SRC can issue sovereign-guaranteed instruments targeting local investors. Its first sukuk offerings under the programme were issued in March 2021 in two tranches of seven and 10 years respectively, totalling SAR4 billion.

Chellam Plantations' Sabah sukuk gets AAA(fg)/Stable rating from RAM

RAM Ratings has reaffirmed the AAA(fg)/Stable rating of the RM150 million 10-year tranche (2016/2026) under Chellam Plantations Sabah’s RM300 million Guaranteed Sukuk Murabahah Programme (2016/2033). The enhanced rating is premised on the irrevocable and unconditional guarantee extended by Danajamin Nasional (rated AAA/Stable/P1), the company said.

Chellam Plantations is an investment-holding company, with subsidiaries involved in the cultivation of oil palms and the milling of palm oil. Independent of the financial guarantee, its standalone credit profile is constrained by its relatively small planted area of 13,799 ha which can only contribute 30% of its processing capacity. Based on its capacity of 871,200 metric tonnes (MT) per annum, the group depends on processing fresh fruit brunches (FFBs) purchased from third parties in addition to its own FFBs. This strategy allows the group to pursue incremental profits despite thin margins. The Group’s oil extraction rate (OER), which stood at 22% in 2019, remains comparable to those of bigger regional players, RAM Ratings said.

While Chellam Plantations’ FFB output declined to 104,609 MT (4.1%) and 91,351 MT (12.7%) year-on-year in 2019 and 1H20, strong FFB growth momentum is expected in the medium term due to a large proportion of young and prime palms (overall weighted-average age: 11 years). Such palms constituted 77% of its total planted area as at end-December 2019.

Chellam Plantations’ production cost for crude palm oil (CPO) decreased to RM1,512 per MT in fiscal 2019 (fiscal 2018: RM1,650), thanks to lower average cost for external FFB purchases, in line with softer CPO prices. Lighter expenses and a higher mill utilisation rate boosted its operating profit before depreciation, interest, and tax (OPBDIT) and OPBDIT margins to a respective RM51.31 mil and 15.36% in fiscal 2019, despite lower revenue (-6.7%) of RM334.02 million.

"We anticipate Chellam Plantations’ topline to improve in fiscal 2020, underscored by healthier average CPO prices," RAM Ratings said in a statement.

Details:

View ratings definitions

Quill Retail Malls' sukuk has a negative outlook: RAM Ratings

RAM Ratings has reaffirmed the respective ratings of Quill Retail Malls’ (QRMSB) RM350 million sukuk murabahah (2017/2024), with a negative outlook. The transaction is secured against Quill City Mall (QCM), a 777,967 sq ft shopping mall in Malaysia with accessibility from Medan Tuanku Monorail Station.

Ratings ranged from AA₁/Negative to A₃/Negative. The negative outlook reflects concerns over potential liquidity stress on the transaction in view of the interruptions to QCM’s turnaround plans, that have now been exacerbated by the Movement Control Order (MCO) to halt the spread of COVID-19. While the RM50 million bank guarantee (BG) facility and six-month coupon reserve can at present adequately support the transaction up to its legal maturity date, weaker-than-expected cashflow and/or collections owing to curtailed businesses during various phases of the MCO, in the absence of further funding injections from the shareholder, will deplete the liquidity facility.

The reaffirmation of the ratings is premised on the available collateral support provided by the property that remains commensurate with the respective ratings.

The property’s occupancy rate is expected to improve to 72% by end-2020, from 61% as at end-December 2019. New anchor tenants include JDX Presto Concept Store, the largest cashless concept store in the ASEAN region – the outlet is JDX Presto’s first online-to-offline store in Malaysia, Orange Esports and UniKL.

RAM Ratings stressed on the market uncertainties and unprecedented events and said hings could change. "Going forward, the property’s performance is envisaged to stay uncertain and volatile in view of the potential variation of newly committed leases, due to the MCO. QCM’s financial performance will also be affected by planned rental relief for tenants in 'non-essential' sectors, although the actual quantum and duration of relief is still in the works," the company said.

"Additionally, 11% of QCM’s total gross rental income is derived from turnover rent, which is vulnerable to weak retail sales post-MCO, given subdued consumer sentiment. Based on our sensitivity analysis, the property’s NPI is likely to fall into negative territory in FY December 2020, assuming two months of rental relief is provided to all tenants, which will necessitate further shareholder support."

NPI stands for net property income.

Dar Al Arkan celebrates US$600 million sukuk listing

Source: Nasdaq Dubai. Yousef Bin Abdullah Al-Shalash, Chairman of Dar Al-Arkan Real Estate Development Company of Saudi Arabia, rang the market-opening bell at Nasdaq Dubai to celebrate the listing of a US$600 million sukuk.

- Listing supports further expansion by one of Middle East’s largest real estate developers

- Dubai is one of the world’s largest venues for sukuk listings, currently valued at US$64.3 billion

Yousef Bin Abdullah Al-Shalash, Chairman of Dar Al-Arkan Real Estate Development Company of Saudi Arabia, has rung the market-opening bell at Nasdaq Dubai to celebrate the listing of a US$600 million sukuk on October 16, 2019.

The listing supports the accelerating development activities of Dar Al-Arkan, one of the Middle East’s major real estate developers, including flagship integrated residential communities across Saudi Arabia, as well as its residential I Love Florence Tower in Downtown Dubai.

This issue was Dar Al Arkan’s 10th issue since 2007 and the 6th tranche of its current US$2 billion programme. The issue is for a five-year term due in February 2025 with a coupon rate of 6.75%. The five-year sukuk was more than 2.5 times oversubscribed and received significant interest from Middle Eastern, European and Asian investors.

It brings Dar Al-Arkan’s total sukuk value on Nasdaq Dubai to US$1.6 billion. Two other sukuk worth US$500 million each were listed in 2017 and 2018.

Al-Shalash said: “With over 1.5 billion US dollars of subscriptions, our latest sukuk issuance was very well received by the market. It is a testament to our strong relationship with the global debt capital markets and a big vote of confidence from investors in our stewardship of their capital. The funds raised provide us with the capital to dynamically invest in our business activities across Saudi Arabia as we see the market conditions improving and prepare for the next upcycle.

"As the region’s international exchange, Nasdaq Dubai provides our sukuk with high visibility to regional and international investors as well as an efficient listing platform regulated to international standards.”

HE Essa Kazim, Governor of Dubai International Financial Center (DIFC), Secretary General of the Dubai Islamic Economy Development Centre (DIEDC) and Chairman of Dubai Financial Market (DFM) said: “Dar Al-Arkan’s new listing further strengthens the close Islamic capital markets ties between the UAE and Saudi Arabia, which greatly benefit issuers, investors and the wider economy.

"We will continue to develop our relationships with shari’ah-compliant entities across the GCC to underpin Dubai’s expansion as the global capital of Islamic economy under the initiative launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, the VP and PM of the UAE and Ruler of Dubai.”

Equity index provider MSCI added Dar Al-Arkan to its Emerging Markets Index following KSA's inclusion in the index in May 2019. Dar Al-Arkan was also one of 12 Saudi-listed companies for which Nasdaq Dubai launched futures contracts in January 2019.

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “We are delighted to deepen our relationship with one of the Middle East’s largest real estate developers and its diverse sukuk investors. This listing underlines the increasing success of Nasdaq Dubai’s strategy of attracting high quality issuers of sukuk across a wide range of industry sectors.”

Dar Al-Arkan’s assets include about 12.4 million sq m of projects under development. The company has handed over 15,000 residential units in KSA and holds a land bank with a book value of circa SR17 billion.

Hamed Ali, Chief Executive of Nasdaq Dubai said: “Our comprehensive exchange infrastructure including our post-listing services is positioned to support Dar Al-Arkan as it pursues its real estate strategy for the benefit of businesses and individuals. We are preparing to expand our support for the capital raising needs of a range of issuers in Saudi Arabia and other regional and international countries.”

The company’s latest sukuk underlines Dubai’s role as one of the largest global centres for sukuk listings by value with a current total of US$64.3 billion. UAE issuers account for 45% of these by value and 55% are from issuers based in other countries.

Aldar Investments lists US$500 million sukuk

• First-ever 10-year public sukuk offering by an Abu Dhabi-based issuer

• Lowest-ever coupon achieved by an Aldar entity, at 3.875%

• Strong demand from international investors, with issue over six times oversubscribed

Aldar Investment Properties has listed a US$500 million sukuk on the Abu Dhabi Securities Exchange. The 100%-owned subsidiary of Aldar Properties successfully placed a fixed-rate US dollar-denominated sukuk with a tenor of 10 years for a nominal amount of US$500 million.

The sukuk carries a coupon rate of 3.875%, the lowest rate ever achieved by Aldar, following strong investor demand. The transaction, which marked the first 10-year public sukuk offering by an Abu Dhabi-based issuer, was over six times oversubscribed. Global investors accounted for 71% of the total transaction allocation.

Talal Al Dhiyebi, CEO of Aldar said: "The success of the transaction represents a strong endorsement by the global investment community of the Abu Dhabi economy and of Aldar's leading position in the regional real estate sector. This landmark deal further strengthens our balance sheet, and is testament to Aldar Investments' status as one of the most efficient platforms for property ownership in the region."

The net proceeds of the offering will be used to refinance existing debt. The issuance contributes to an optimal diversification of Aldar Investments' funding base and extends Aldar's overall duration of its liabilities.

Dubai Islamic Bank, First Abu Dhabi Bank, HSBC and Standard Chartered Bank were the joint global coordinators and joint lead managers, along with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Emirates NBD Capital and Sharjah Islamic Bank as joint lead managers.

Aldar Investments owns and manages a AED20 billion diversified portfolio of high-quality income-generating residential, retail, commercial and hospitality assets. It is rated Baa1 by Moody's, the highest credit rating for a corporate non-government corporate in the region, reflecting its stable recurring revenue, high quality of diversified assets, high occupancies, diversified tenant based and strong operating model.

Sharjah lists US$750 million sukuk

Nasdaq Dubai has welcomed the listing of a US$750 million sukuk issued by the Emirate of Sharjah.

This is the second sukuk listing this year on Nasdaq Dubai by the Emirate of Sharjah, following  a US$1 billion listing in April 2019. 

The total value of all the Emirate’s sukuk listed on the Middle East’s international financial exchange has now reached US$4.2 billion from five listings, with the first listing having taken place in 2014. 

Dubai’s total sukuk listings have now reached US$63.7 billion, strengthening the city's role as one of the largest sukuk listing centres in the world by value.

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.

Malaysia leads the sukuk market

Source: IIFM website. The IIFM
sukuk report for 2018.

Malaysia continues to be the leader in sukuk, with combined domestic and international issuances of US$612 billion, according to the International Islamic Financial Market (IIFM) Sukuk Report 2018.

Launched at a May IIFM seminar organised by IIFM and hosted by Labuan IBFC, the report examines the development, structural preferences and drivers of the international and domestic sukuk market in recent years with a special focus on 2017. The report also provides an overview of the trends and prospects of the sukuk market and highlights major issuances around the world in 2017.

The report suggests that Malaysia with its deep capital market retained its position as the top sukuk issuer over its peers from the Far East and the Gulf Cooperation Council (GCC). In comparison, Indonesia's issuances total US$63 billion while KSA issued US$95 billion. The UAE had US$68 billion in issuances.

Labuan Financial Services Authority Director-General Danial Mah Abdullah said, “Malaysia has always played an important innovative role in Islamic financial services, boasting a comprehensive regulatory framework for Islamic banking, finance, takaful and asset management.

“As an extension and in support to this, Labuan IBFC has also been an innovative bed for Islamic financial products. For instance, the introduction of waqf embedded within a private foundation set up as a wealth management structure, through the Labuan International Waqf Foundation is a classic example of this innovation from Labuan IBFC. It is also home to the world’s first US-dollar denominated exchangeable sukuk. These have contributed to Malaysia’s position as the global leader in sukuk issuance.”

Ijlal Ahmed Alvi, Chief Executive of IIFM commented, “Barring Malaysia, the corporate sukuk issuances in most of the established jurisdictions is below expectation and challenges including legal and policy issues must be resolved to encourage more sukuk issuances by corporate entities.

“There is a degree of confidence in both established sukuk issuing jurisdictions as well as new jurisdictions entering the sukuk market which is evident from longer-dated sukuk ranging from 30 years to perpetual being issued.”

In his opening remarks, Danial said that the seminar is an excellent opportunity to build greater awareness and enhance understanding on the standardisation efforts spearheaded by the IIFM. Danial said, “The standards published by the IIFM have brought tremendous benefits to the industry by reducing legal and shari'ah compliance related costs, strengthening risk management capabilities, increasing efficiency, promoting shari'ah harmonisation and encouraging law reforms.

“These standards are not only utilised by financial institutions which are active in Islamic finance markets in the GCC, Africa, Asia and Europe but also by the regulators as reference for providing Shariah-compliant facilities to Islamic financial institutions in their respective jurisdictions.”

Chairman of IIFM Khalid Hamad said, “IIFM, in publishing shari'ah-compliant standard documentation and product confirmations for the Islamic finance wholesale market, is assisting in creating a transparent and robust industry and I expect the leadership of Islamic banks as well as the regulators to encourage the use of IIFM standards in their jurisdictions which will further enhance efficiency, reduce costs, promote best market practice and serve in the unification and harmonisation of the industry.”

Details:

Download the IIFM Annual Sukuk Report 2018 (PDF)

Sukuk Al-Salam fully subscribed in Bahrain

The Central Bank of Bahrain (CBB) has announced that issue No.205 (BH00074U7R28) of the Sukuk Al-Salam Islamic securities was fully subscribed.

Subscriptions worth BD43 million were received for the ssue, which carries a maturity of 91 days.

The expected return on the issue, which begins on 23 May 2018 and matures on 22 August 2018, is 3.4% compared to 3.32% for the previous issue on 18 April 2018.

Earlier in May, the CBB announced that issue No.153 (BH000275W671) of the short-term Islamic leasing bonds, Sukuk Al-Ijara, were subscribed by 100%.

Subscriptions worth BD26 million were received for the issue, which matures in 182 days.

The expected return on the issue, which began on 10 May and matures on 8 November 2018, is 3.61% compared to 3.6% for the previous issue on 12 April 2018.

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

Noor Bank marks listing of US$500 million sukuk on Nasdaq Dubai

- Capital raised supports bank’s rapid growth as a universal Islamic bank across UAE

- Five-year term oversubscribed 2.1 times

- Listing underlines Dubai’s No. 1 position globally for sukuk at US$59.72 billion

Source: Nasdaq Dubai. John Iossifidis, CEO, Noor Bank, centre holding the bell, with HE Essa Kazim, Governor of Dubai International Financial Centre (DIFC), Secretary General of Dubai Islamic Economy Development Centre (DIEDC), Chairman of Dubai Financial Market (DFM), and Vice Chairman of Noor Bank; as well as Hamed Ali, Chief Executive of Nasdaq Dubai, and senior Noor Bank executives.

John Iossifidis, CEO, Noor Bank, a shari’ah-compliant bank in the UAE, rang the market-opening bell to celebrate the listing of a US$500 million sukuk on Nasdaq Dubai on May 16.

The capital raised supports Noor Bank’s continuing rapid growth as a fully scalable universal Islamic bank across the UAE active in a wide range of products and services including retail, corporate and investment banking as well as treasury and insurance. Dubai-based Noor Bank has arranged more than US$64 billion worth of syndication and capital market transactions since 2008.

Listed on 24 April 2018, Noor Bank’s US$500 million sukuk is a five-year instrument that was oversubscribed 2.1 times following a successful international roadshow. It is Noor Bank’s third sukuk to be hosted by the region’s international exchange, following two listings of US$500 million each in 2015 and 2016.

Iossifidis said: “The capital we successfully raised in a competitive funding environment substantially diversifies our investor base. The proceeds will contribute to Noor Bank’s strategy of expanding and developing its core business areas aligned to the vision of the UAE and Dubai. Our listing on Nasdaq Dubai provides our sukuk with global visibility and an internationally recognised regulatory framework from within the Emirate where we are based.”

HE Essa Kazim, Governor of DIFC, Secretary General of DIEDC, Chairman of DFM, and Vice Chairman of Noor Bank, said: “The streamlined issuance and listing of Noor Bank’s latest sukuk demonstrates the strength and depth of expertise and commitment in Dubai to the Islamic bond sector, as well as the policy of the Emirate’s leading entities to work together for the common good. Dubai will continue to develop its expertise in this field in line with its growth 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.”

Noor Bank’s sukuk listing underlines Dubai’s role as the largest global centre for sukuk listings by value, currently totalling US$59.72 billion.

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: "This listing by a leading UAE financial services company provides further evidence of strong activity in the sukuk sector, with 10 listings so far this year on Nasdaq Dubai from UAE and international issuers, valued at a total of US$8.75 billion. Nasdaq Dubai will further enhance its infrastructure in order to provide a competitive and flexible listing environment that meets issuers’ evolving requirements.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: "Our collaboration with Noor Bank underlines our successful strategy of forming deep relationships with prominent issuers of Islamic securities, through which we are expanding the sharia’ah-compliant financial services sector and further increasing public confidence in Islamic products. As the Islamic capital markets extend their reach in the region and internationally, we are preparing to introduce further initiatives and innovation across a variety of asset classes.”

Sharjah Islamic Bank, DAMAC Properties list new sukuk with Nasdaq Dubai

Source: Nasdaq Dubai. Adil Taqi, Group Chief Financial Officer of DAMAC Properties, has rung the market opening bell to celebrate the listing of a US$400 million sukuk issued by DAMAC Real Estate Development on Nasdaq Dubai. The company is a wholly owned subsidiary of DAMAC Properties.

Nasdaq Dubai has welcomed the listing of two sukuk by UAE issuers. Sharjah Islamic Bank (SIB) listed a US$500 million sukuk, and DAMAC Properties, a major real estate developer in the region, listed a US$400 million instrument.

DAMAC Properties delivers residential, commercial and leisure properties across the region, including the UAE, KSA, Qatar, Jordan, Lebanon and Oman as well as the UK. The listing on the region’s international exchange supports DAMAC Properties’ capital raising programme for general corporate purposes and its ongoing growth strategy, as it continues to extend its footprint in the Middle East and beyond with projects.

The listing on the region’s international exchange supports DAMAC Properties’ capital raising programme for general corporate purposes and its ongoing growth strategy. The sukuk was sold to investors in the Middle East, Europe and Asia. It is the third sukuk listed by Dubai-based DAMAC Properties on Nasdaq Dubai, following a US$650 million sukuk listed by the company in April 2014 and a US$500 million issuance in April 2017.

Hussain Sajwani, Chairman of DAMAC Properties, said: “DAMAC continues to expand its development portfolio at home and internationally, as we seek out strategic investments that would enable us to expand our footprint into key global markets. The sukuk enables us to raise capital cost effectively and our listing on Nasdaq Dubai gives our sukuk high visibility around the world together with an excellent regulatory framework.”

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “This issuance and listing by one of the region’s leading real estate developers underlines the leading role played by Dubai as an international centre of sukuk expertise and activity, made possible by the depth and breadth of Islamic finance professionals based in the Emirate. Sukuk are an important pillar of the initiative positioning Dubai to be the global capital of the Islamic economy launched by HH Sheikh Mohammed Bin Rashid Al Maktoum, the VP and PM of the UAE and Ruler of Dubai.”

Two other sukuk issued by SIB are currently admitted to trading on Nasdaq Dubai. Both are US$500 million issuances that listed in 2015 and 2016. DAMAC Properties’ other sukuk listed on Nasdaq Dubai comprise issuances of US$650 million and US$500 million in 2014 and 2017 respectively.

SIB supplies a broad range of sharia'ah-compliant retail, corporate and investment services through its networks across the country, including asset management and international banking, serving individual and institutional clients.

The latest listings by SIB and DAMAC Properties bring the total value of all sukuk listed in Dubai to US$59.22 billion, strengthening the Emirate’s role as the leading global centre for sukuk listings by value.

Hamed Ali, Chief Executive of Nasdaq Dubai, said: “As the sukuk market expands globally by attracting a growing range of issuers and investors from diverse backgrounds, we will further enhance our services on their behalf including before listing and post-listing activities. Nasdaq Dubai will continue to develop its Islamic finance asset classes, with sukuk at the forefront of our growth and innovation as we expand our role as the region’s international exchange.”

Bahrain issues US$1 billion seven-year sukuk tranche

On 28 March 2018, Bahrain successfully priced an international US$1 billion sukuk offering. 

The financing exercise forms part of the kingdom’s prudent approach in managing its funding requirements. The transaction received strong global investor interest, with the order book peaking at around US$2.1 billion (2.1x of the total amount raised) from more than 100 investors.

Based on investor feedback, Bahrain elected to pursue the optimal cost-efficient debt capital markets format, issuing a single tranche sukuk offering with a yield of 6.875% that matures October 2025. The offering attracted a globally diversified order book from both Islamic and conventional investors, with 59% of the notes distributed in MENA, 16% in Europe, 14% in UK, 9% in the US and 2% into Asia. Distribution by investor type comprised 63% of banks/private banks, 33% of fund managers, 3% of pensions and insurance, and 1% classed as "others".

“Bahrain has fostered a long-term relationship with debt capital markets investors, and we are pleased to see strong appetite to the transaction despite the volatile market conditions,” said Salman Al-Khalifa, Executive Director of Banking Operations at the Central Bank of Bahrain.

The kingdom is expected to raise funds through other sources of financing, including local debt capital markets and potentially could seek to come back to the international debt capital markets at a later stage in 2018.

Bahrain's Al-Salam and Al-Ijara sukuk both 100% subscribed

The Central Bank of Bahrain (CBB) has announced that the monthly issue of the Sukuk Al-Salam Islamic securities has been fully subscribed. Subscriptions worth BD43 million were received for the BD43 million issue, which carries a maturity of 91 days.

The expected return on the issue, which begins on 21 March 2018 and matures on 20 June 2018, is 3.17% compared to 3.13% for the previous month's issue on 21 February 2018.

The monthly issue of the short-term Islamic leasing bonds Sukuk Al-Ijara, have also seen 100% subscription, CBB said. Subscriptions worth BD26 million were received for the BD26 million issue, which carries a maturity of 182 days.

The expected return on the issue, which begins on 15 March 2018 and matures on 13 September 2018, is 3.39% compared to 3.27% for the previous issue on 8 February 2018.

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

US$1.25 billion sukuk launched on Nasdaq Dubai

Nasdaq Dubai is hosting a US$1.25 billion sukuk by the Islamic Development Bank (IDB), whose activities include financing development projects for its 57 member countries.

The listing brings the number of sukuk listings by the IDB on the exchange to nine, with a total value of US$11.5 billion, making it one of the largest sukuk issuers on Nasdaq Dubai.

IDB participates in equity capital and grant loans for productive projects and enterprises as well as providing financial assistance to member countries in other forms. This includes financing infrastructure and agricultural projects such as roads, dams, schools, hospitals, housing, and rural development in the public and private sectors. IDB’s sukuk support the bank’s economic and social advancement goals in line with shari'ah principles.

IDB’s latest listing underlines Dubai’s role as the leading global centre for sukuk listings by value. The portfolio is currently worth US$57.7 billion.  

Sharjah lists US$1 billion sukuk on Nasdaq Dubai

Nasdaq Dubai has welcomed the listing today of a US$1 billion sukuk issued by the Emirate of Sharjah, UAE.

This is the first sovereign sukuk to be issued in the GCC in 2018, as well as the Emirate of Sharjah’s third and largest sukuk listing on the exchange.

The 10-year sukuk follows previous sukuk listings by the Emirate on Nasdaq Dubai of US$750 million and US$500 million in 2014 and 2016 respectively.

The latest listing raises the total value of sukuk listed in Dubai to US$56.5 billion, the largest amount of any listing centre in the world. A total of US$18.75 billion, amounting to 35% of Nasdaq Dubai’s sukuk listings, is from sovereign issuers.

Indonesian government lists two sukuk on Nasdaq Dubai

The government of Indonesia has listed two sukuk worth a combined US$3 billion on Nasdaq Dubai.  
The collaboration underlines the close relations between the UAE and Indonesia, the world’s most populous Muslim country, as well as Dubai’s growth as the global capital of the Islamic economy.

The Indonesian government is the largest sukuk issuer on Nasdaq Dubai by both value and number of listings, with securities now totalling US$14.5 billion, from 10 issuances.

The total value of all sukuk listed on Dubai’s exchanges has now reached US$56.47 billion, the largest amount of any listing centre in the world.

RAM Ratings maintains AAA ratings for Suria KLCC’s Sukuk Murabahah Programme

RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Suria KLCC’s Sukuk Murabahah Programme of up to RM600 million. Suria KLCC is the owner and manager of the six-storey Suria KLCC Mall (the Mall), located within the Kuala Lumpur City Centre (KLCC) development in Malaysia.

RAM Ratings said the decision was based on the company’s resilient earnings and strong financial metrics, underpinned by Suria KLCC Mall’s superior asset quality as well as the company’s lowly geared balance sheet and robust debt-protection measures, despite a generally weak retail industry. 

As at end-July 2017, the mall maintained a relatively high occupancy rate of 96%, albeit lower than the 98% of 2015 in its ongoing tenant-remixing exercise. RAM Ratings believes that the mall’s occupancy level should return to its historical levels once the exercise concludes in 2018. 

RAM Ratings also pointed out that around half of the leases expiring in 2017 have been renewed at 7% rental reversions (editor's note: a change in the amount of rent to be paid). "We believe the mall will face minimal difficulty in securing lease renewals and procuring new tenants for its remaining vacant space," the consultancy said.

RAM Ratings analyses risks for sukuk ijarah at Ampang Point Shopping Centre

RAM Ratings has reaffirmed the ratings of Purple Boulevard’s RM250 million sukuk under its RM450 million asset-backed Sukuk Ijarah Programme. The issuer is a special-purpose vehicle sponsored by Nadin Holdings and Nadin Management to undertake the securitisation of Ampang Point Shopping Centre in Malaysia.

There are five classes of sukuk under the programme with different ratings and expected maturity dates, with the earliest being 13 November 2020.

RAM Ratings says the reaffirmation of the ratings of the Class A, Class B and Class C Sukuk Ijarah - AAA/Stable, AA₃/Stable and A₃/Stable respectively - is premised on our expectation that Ampang Point’s performance will remain supportive of our assumed annual sustainable net property income (NPI) and also the assessed capital value of RM221.1 million. The reaffirmation of the Class D Sukuk Ijarah rating (AAA[fg]/Stable) reflects the credit standing of its guarantor, Danajamin Nasional, the rating of which was reaffirmed at AAA/Stable on 23 August 2017, RAM Ratings added.

In fiscal 2016, Ampang Point recorded positive rental reversion as a result of the commencement of leases and revised rental rates of a related-party tenant, RAM Ratings observes. However, the property’s average rental rate (ARR) fell in the first seven months of FY17, mainly because some tenancy agreements were renewed at lower rental rates during the period. This downside risk is mitigated however by the turnover rent component. Correspondingly, NPI fell 1.9% to RM22.85 million (annualised), from RM23.29 million in fiscal 2016 – above the assumed annual sustainable NPI of RM20.00 million. Despite this, Ampang Point’s average occupancy rate (AOR) remained stable at 95%-96%. 

"We note that rental reduction is part of the management’s tenant-retention strategy amid the challenging business environment. As such, we envisage its top-line growth to be constrained in the near to medium term, along with some margin compression," RAM Ratings said. 

The consultancy also noted that Ampang Point's management is continually striving to create additional lettable space and enhance the property’s tenant mix to drive footfall. "These efforts, if they materialise, may provide upside to the property’s cashflow. Nonetheless, our assessment does not accord any benefit to these considerations as such plans remain fluid at this juncture," the consultancy said.

RAM Ratings also brought up the risk of tenant concentration as the top five tenants account for 45.5% of the property's total net lettable area and 19.7% of its monthly gross rental income as at end-July 2017. Furthermore, almost half of the tenancies will expire in 2018. "That said, we expect minimal non-renewal risk from its top anchor tenants as one of them is a related party while two have been tenants since Ampang Point’s inception; the other two anchor tenants are only in their second rental cycles," RAM Ratings said. 

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Edra Energy's proposed sukuk wakalah gets AA3 rating from RAM

RAM Ratings has assigned a preliminary rating of AA3/Stable to Edra Energy (EESB)'s proposed sukuk wakalah of up to RM5.28 billion in nominal value (2017/2037).

EESB was incorporated to design, construct, own, operate and maintain the largest gas power plant in Malaysia, with a capacity of 2,242 MW combined-cycle, gas-turbine power plant in Alor Gajah, Melaka, Malaysia. Proceeds from the proposed sukuk, amounting to RM5.21 billion, will mainly be utilised to fund the construction of the plant.

The preliminary rating reflects EESB’s strong project economics, underscored by stable cashflow generation, resulting in a minimum finance service coverage ratio of 1.50 times under RAM’s sensitised case upon completion of the plant, commensurate with an AA3 rating. 

“Given the technology used in the turbine is untested and no other plant of this scale is currently in commercial operation globally, the company is exposed to technology risk,” highlights Chong Van Nee, RAM’s Co-Head of Infrastructure & Utilities Ratings. “As the plant is under construction stage and equity will be progressively injected into the project throughout the construction period, this also exposes the project to construction-related risk and uncertainty of funding.” 

The company is entitled to full available capacity payments regardless of the quantum of electricity generated, as long as it meets performance requirements under the 21-year power purchase agreement (PPA) signed with Tenaga Nasional (TNB). EESB can also fully pass through fuel costs to TNB via energy payments received from selling electricity, provided that the plant operates within heat rates stipulated in the PPA. RAM Ratings points out that the credit profile for TNB is "sturdy".

The technology risk associated with General Electric (GE)'s 9HA.02-model gas turbine, which can achieve an efficiency rate of over 60%, will be largely addressed via EESB’s long-term service agreement (LTSA) with GE for the operations and maintenance of the gas turbines, steam turbines and generators, RAM Ratings says. GE will provide further support in respect of the insurability of the plant and a special warranty to cover collateral damages.

The lump-sum turnkey engineering, procurement and construction (EPC) contract signed with Hyundai Engineering Company, Hyundai Engineering & Construction Company and Hyundai Engineering Malaysia (collectively, the EPC contractors) provides for performance guarantees, an extended defect liability period of three years and liquidated damages for delays. This mitigates construction risk, RAM Ratings said. In addition, EESB will be insured against any financial loss arising from delays. 

The company’s parent, Edra Power Holdings, is described as having a sturdy business and financial profile, which also allays concerns to some extent on funding uncertainty, RAM Ratings said. 

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