Perhaps we should all be surprised at how good 2009 turned out to be in the Islamic capital markets. Despite the struggles of Dubai and its real estate market, the Sukuk market showed organic growth at a rational rate, and the overall Islamic financial market reflected the demand for infrastructure, project and trade finance in the key markets of the GCC and Southeast Asia.
Even in Europe, there was important progress. In selecting the Deal of the Year, many factors, and several important firsts, including the Monetary Authority of Singapore, Petronas and GE Capital, had to be taken into account. But in the end, it was the struggle to introduce the right mix of financial concepts and new laws into the civil law context of Indonesia that prevailed and the IDR and USD issuances of the Republic of Indonesia are awarded jointly as a reflection of this process and its importance to the market as a whole.
On the less happy side, we did contemplate a “Best Restructuring” award but somehow, it just didn’t make sense. On the one hand, we only had one relevant submission this year; perhaps there will be more for 2010. On the other hand, we couldn’t help but wonder — an award for fixing what you broke? It’s something that we need to ponder, for at least a year.
Deal of the Year:
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Republic of Indonesia; Perusahaan Penerbit SBSN IDR5.6 Trillion (US$595 million) Domestic Sukuk
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Size:
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IDR5.6 Trillion (US$595 million)
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Issuer:
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Republic of Indonesia; Perusahaan Penerbit SBSN
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Arrangers:
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Andalan Artha Advisindo Sekuritas, Anugerah Securindo Indah, Bahana Securities, Bank Internasional Indonesia, Bank Mandiri, Bank Syariah Mandiri, BNI Securities, CIMB Islamic, Citibank, Danareksa Sekuritas, HSBC Amanah Syariah, Reliance Sekuritas, Trimegah Securities
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Legal counsel for Issuer:
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MMIK Law Firm
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Led by Barclays Capital, HSBC and Standard Chartered the US$650 million transaction closed on the 23rd April 2009, at the exact moment that the global capital markets were declared dead. This deal, which should have been our winner, heralded the revival of the global Sukuk market and put the global debt markets back on the respirator. Twelve hard years after the Asian Crisis, Indonesia demonstrated strong domestic fundamentals, good domestic economic management, and improved credit in the issuance of their BB rated securities (Fitch). These five year Ijarah securities applied the new Sukuk and beneficial ownership laws, which have now demonstrated that the economic potential of the Indonesian market may be financed applying Islamic capital market tools from international sources. Structured as a 144A transaction, the Sukuk generated strong interest from US investors among the universe of 230 investors.
But, we have selected another Indonesia deal. In their second domestic issuance within a six month period, the Republic of Indonesia firmly established their new Sukuk and beneficial rights rules. The IDR 5.6 trillion (US595 million) domestic transaction, the Republic of Indonesia achieved broad domestic distribution with 39% of the deal sold to private individuals; 10.9% went to housewives! Whereas the US dollar Republic of Indonesia Sukuk demonstrated Indonesia’s economic progress, the domestic Sukuk has deep importance in the establishment of a domestic pricing and credit quality benchmark. Having pursued a systematic approach to solving complex legal challenges based in the difference of theories underlying common law/Shariah (similar, not the same in problem solving approaches) and civil law, the domestic transaction opens the gates to the development of a robust domestic Islamic capital market.
Sovereign: | Republic of Indonesia; Perusahaan Penerbit SBSN Indonesia I US$650 million Global Sukuk; AND Republic of Indonesia; Perusahaan Penerbit SBSN IDR 5.6 Trillion Domestic Sukuk |
Size: | US$650 million Global Sukuk; IDR 5.6 Trillion Domestic Sukuk |
Issuer: | Republic of Indonesia; Perusahaan Penerbit SBSN |
Arrangers for Global Sukuk: | Bahana Securities, Barclays Capital, BNI Securities, HSBC Amanah Syariah, Islamic Bank of Asia, Maybank Investment Bank, Standard Chartered |
Legal Counsels for Global Sukuk: | Assegaf Hamzah & Partners, Allen & Overy, Hadiputranto, Hadinoto & Partners, Linklaters Allen & Gledhill |
Arrangers for the Domestic Sukuk: | Andalan Artha Advisindo Sekuritas, Anugerah Securindo Indah, Bahana Securities, Bank Internasional Indonesia, Bank Mandiri, Bank Syariah Mandiri, BNI Securities, CIMB Islamic, Citibank, Danareksa Sekuritas, HSBC Amanah Syariah, Reliance Sekuritas, Trimegah Securities |
Legal counsel for the Domestic Sukuk: | MMIK Law Firm |
Most Innovative: | Cagamas RM915 million Medium Term Notes |
Size: | RM915 million |
Issuer: | Cagamas |
Arrangers: | AmInvestment Bank, Maybank Investment Bank, Standard Chartered Bank |
Legal counsel for Arrangers: |
Wong & Partners |
Legal counsel for Issuer: | Zaid Ibrahim & Co |
Cross Border:
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IDB Trust Services S$200 million Investment Sukuk
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Size:
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S$200 million
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Issuer:
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Islamic Development Bank’s
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Arranger:
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Standard Chartered
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Legal Counsels:
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Clifford Chance, Denton Wilde Sapte (Dentons), Ogier
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The rise of Singapore into its new role as an Islamic finance hub is demonstrated by two transactions, one of which is the Islamic Development Bank’s (IDB) SG$200 million (US$144 million) Sukuk led by Standard Chartered. SG$200 million Trust Certificates were issued under IDB’s US$1.5 billion Trust Certificate Issuance Program. The transaction benefitted from changes introduced by the Monetary Authority of Singapore (MAS) in July 2009.
MAS’s new rules expanded the types of securities which financial institutions (subject to MAS’ regulation) may hold as part of their minimum liquid assets with the central bank. This change meant that such financial institutions can now buy and repo Singapore dollar-denominated securities issued by any AAA rated supranational, sovereign or sovereign-guaranteed company with the central bank.
Project & Infrastructure Finance: | PAAB Musharakah & Ijarah Program |
Size: | RM20 billion (US$5.92 billion) |
Issuer: | Pengurusan Aset Air Berhad |
Arranger: | CIMB Islamic |
Legal Counsel: | Albar & Partners |
Sukuk: | GE Capital Sukuk |
Size: | US$500 million |
Issuer: | GE Capital |
Arrangers: | Citigroup, Goldman Sachs International, Liquidity Management House, National Bank of Abu Dhabi, Standard Chartered Bank, Bank Islam Brunei Darussalam |
Legal counsel for Issuer: | Allen & Overy |
Legal counsel for Arrangers: |
Clifford Chance |
Legal counsel for Arrangers (Cayman Law): |
Conyers, Dill & Pearman |
IFC Hilal Sukuk al-Istithmar
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Size:
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US$100 million
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Issuer:
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Hilal Sukuk Company
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Arrangers:
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Dubai Islamic Bank, HSBC Amanah, Kuwait Finance House Bahrain, Liquidity Management House
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Legal Counsels:
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Lovells, Maples and Calder
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Corporate Finance: | Petronas US$1.5 billion Global Sukuk |
Size: | US$1.5 billion |
Issuer: | Petronas |
Arrangers: | Morgan Stanley, Citibank, CIMB Islamic |
Legal Counsels: | Cleary Gottlieb Steen & Hamilton, Kadir Andri & Partners, Millbank, Tweed, Hadley & McCloy, Lovells, ZUL RAFIQUE & partners |
Qatar Airways Syndicated Islamic Finance Facility
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Size:
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US$150 million
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Issuer:
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Qatar Airways
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Arrangers:
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Standard Chartered, Bank Islam Malaysia, DBS Bank Ltd, Masraf Al Rayan, Maybank Investment Bank, Sumitomo Mitsui Bank Corporation Europe Ltd, The Islamic Bank of Asia Limited
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Legal Counsel for Issuer:
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Denton Wilde Sapte
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Legal Counsel for Arrangers:
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Norton Rose
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On the one hand, Ijarah has become the safe tool for Islamic finance during the recession. This provides a clear safe method or delivering credit whilst controlling the asset that represents the credit vehicle.
On the other hand, the proliferation of Ijarah deals has made the method become standardized and mundane. This is not a bad thing, but makes it more difficult to define a standout winner. In this environment, the Qatar Airways acquisition of a Boeing 777-200LR worth US$150 million is notable. Foremost, the deal pulled together a diverse syndicate led by Standard Chartered Bank.
Murabahah & Trade Finance:
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PT Angels Products Structured Murabahah Trade Finance
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Size:
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US$25 million
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Issuer:
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PT Angels Products
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Arranger:
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International Islamic Trade Finance Corp.
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Year in and year out, the top nominees for true trade finance reflect dynamic markets in Turkey and Indonesia. This year’s runner up is Turkey’s Ozkan Demir Celik, but Angels was the runaway winner, thanks to The International Islamic Trade Finance Corp (ITFC) performing its role of leading the way in market and structure development.
The ITFC, an arm of the Islamic Development Bank, arranged this October 2009 trade finance facility for the import of raw sugar to Indonesia. The US$25 million facility is a three-month revolving warehouse facility. This Murabahah to Purchase Order process allows Angels to take delivery of small quantities of sugar on a spot basis whereas ITFC buys in bulk.
Structured Finance:
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Zain KSA US$2.6 billion Murabahah Refinancing
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Size:
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US$2.6 billion
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Issuer:
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Arrangers:
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Legal Counsels:
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In a year of many highly structured deals, Zain KSA’s Wa’ad Profit Rate Swap arranged by Banque Saudi Fransi and Calyon is the winner. The transaction applies an auction of exposures relating to the notional amount, and covers the risk for US$2.2 billion of exposure. This is believed to be the largest Profit Rate Swap in 2009. The fledgling Islamic derivatives field has often lacked the capacity to provide for the management of large exposures. The Zain Profit Rate Swap demonstrates substantial capacity despite a difficult market.
Syndicated: | Saudi Bin Ladin Group Multi-Purpose Islamic Credit Facility |
Size: | SAR3.15 billion (US$840 million) |
Issuer: | Saudi bin Ladin Group |
Mandated lead arranger, sole bookrunner, investment agent, Shariah advisor & security agent: | Dubai Islamic Bank |
Participating Banks: | Mashreqbank, Emirates NBD, Abu Dhabi Commercial Bank |
Legal Counsel: | Simmons & Simmons |
Cagamas RM915 million Medium Term Notes
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Size:
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RM915 million
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Issuer:
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Cagamas
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Arrangers:
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AmInvestment Bank, Maybank Investment Bank, Standard Chartered Bank
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Legal counsel for
Arrangers: |
Wong & Partners
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Legal counsel for Issuer:
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Zaid Ibrahim & Co
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In a number of environments, Tawarruq is a preferred financing tool due to a lack of regulation for other Islamic methods. In Malaysia, the broadening of the Islamic tool kit has allowed Tawarruq to become another business choice.
With the launch of the new commodities house in Malaysia, Cagamas tested the applicable concepts through the issuance of RM915 million (US$270 million) of securities. The March 2009 transaction applied methods which now apply to the Suq al Sila at Bursa Malaysia and demonstrated the efficacy of using alternative markets and commodities (crude palm oil in this case) for Tawarruq transactions. The securities are issued and traded on the same basis as the Sukuk al Dayn under domestic Securities Commission rules in Malaysia.
Honorable mention: This goes to Sarawak Energy’s RM1.6 billion (US$473 million) arranged by AmInvestment Bank, CIMB Investment Bank, RHB Islamic Bank, KFH–Malaysia and Maybank Islamic; and Mobily which raised SAR1.5 billion (US$400 million) with Riyad Bank, Samba Financial Group, HSBC Saudi Arabia, and the National Commercial Bank as lead arrangers.
IPO:
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MAXIS
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Size:
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Issuer:
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Maxis
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Global co-ordinator:
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CIMB Islamic
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Joint Global Co-ordinators and Joint Bookrunners:
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Goldman Sachs (Singapore), Credit Suisse (Singapore)
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Joint bookrunner:
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UBS, Nomura International, J.P. Morgan Securities
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Joint Managing Underwriter:
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RHB Investment Bank, Maybank Investment Bank, AmInvestment Bank
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Legal counsel for Company
(Malaysian Law): |
Kadir Andri & Partners
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Legal counsel for Promoter and Selling Shareholder (Malaysian Law):
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ZUL RAFIQUE & partners
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Legal counsel for Joint Managing Underwriters, Joint Global Co-ordinators, Joint Bookrunners and Lead Managers (Malaysian Law):
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Adnan Sundra & Low
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Legal counsel for Joint Global Co-ordinators, Joint Bookrunners and Lead Managers (United States and English Law):
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Linklaters Allen & Gledhill
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Legal counsel for company, promoter & selling shareholder:
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Clifford Chance
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M&A:
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MMC Corporation
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Size:
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RM1.85 billion (US$557.89 million)
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Issuer:
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MMC Corporation
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Arranger:
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Maybank Investment Bank
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Legal Counsels:
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Albar & Partners, Messrs Pakhruddin & Partners
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Musharakah: | Sunway Platinum Success Musharakah Financing |
Size: | RM132 million (US$39 million) |
Issuer: | Sunway Platinum |
Arranger: | Maybank Islamic |
Legal Counsel: | Albar & Partners |
Equity:
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Gulf Finance House Convertible Tawarruq Facility
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Size:
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US$100 million
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Issuer:
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Gulf Finance House
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Arranger:
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Deutsche Bank
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Legal Counsel:
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Allen & Overy
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Abu Dhabi Islamic Bank Tier 1 Mudarabah Certificates
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Size:
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AED2 billion (US$545 million)
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Issuer:
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Abu Dhabi Islamic Bank
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Arrangers:
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Government of Abu Dhabi, J.P. Morgan
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Legal Counsels:
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Clifford Chance, White & Case
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J.P. Morgan advised Abu Dhabi Islamic Bank on the issuance of Tier 1 AED2 billion (US$545 million) Mudarabah notes.
These notes were issued in response to the Government of Abu Dhabi’s initiative to inject additional capital into the financial system. The Sukuk are expected to pay an annualized return of 6% per annum. The five-year Sukuk represent non-voting, non-cumulative perpetual securities and are callable subject to certain conditions.
Real Estate:
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TDIC Sukuk Limited
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Size:
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US$1 billion
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Issuer:
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Tourism Development & Investment Company
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Arrangers:
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Abu Dhabi Commercial Bank, HSBC Bank, Standard Chartered Bank
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Legal Counsels:
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Clifford Chance, Linklaters, Maples and Calder
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Pakistan: | Pakistan International Airlines Corporation Domestic Sukuk Ijarah |
Size: | PKR6.8 billion (US$80.9 million) |
Issuer: | Pakistan International Airlines Corporation |
Arrangers: | Standard Chartered, National Bank of Pakistan, Habib Bank Limited, United Bank Ltd, Meezan Bank Limited |
Legal Counsel: | Mandviwalla & Zafar |
Yemen:
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SABAFON ECA-backed Asset Murabahah Financing
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Size:
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US$5.7 million
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Issuer:
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SABAFON
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Arranger:
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HSBC Bank Middle East Limited
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Legal Counsel for Arranger:
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Norton Rose
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Bahrain: | Al Dur IWPP Ijarah Islamic Financing Facility |
Size: | US$1.6 billion |
Issuer: | Al Dur IWPP |
Arrangers: | Al Rajhi Bank, Banque Saudi Fransi, Calyon, Islamic Bank of Asia |
Legal Counsels: | Shearman & Sterling, Milbank, Tweed, Hadley & McCloy |
Malaysia:
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PAAB Musharakah & Ijarah Program
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Size:
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RM20 billion (US$5.92 billion)
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Issuer:
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Pengurusan Aset Air Berhad
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Arranger:
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CIMB Islamic
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Legal Counsel:
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Albar & Partners
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Kuwait:
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Burgan Company for Well Drilling Trading & Maintenance Syndicated Ijarah Facility
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Size:
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US$125 million
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Issuer:
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Burgan Company for Well Drilling Trading & Maintenance
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Arrangers:
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Liquidity Management House, Gatehouse Bank, BNP Paribas
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Legal Counsel for Arrangers:
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Herbert Smith
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Legal Counsel for Issuer:
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Clifford Chance
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Qatar:
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Qatar Airways Syndicated Islamic Financing Facility
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Size:
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US$150 million
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Issuer:
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Qatar Airways
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Arrangers:
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Standard Chartered, Bank Islam Malaysia, DBS Bank Ltd, Masraf Al Rayan, Maybank Investment Bank, Sumitomo Mitsui Bank Corporation Europe Ltd, The Islamic Bank of Asia Limited
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Legal Counsel for Issuer:
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Denton Wilde Sapte
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Legal Counsel for Arrangers:
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Norton Rose
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Indonesia: | Republic of Indonesia; Perusahaan Penerbit SBSN Indonesia I US$650 million Global Sukuk; AND Republic of Indonesia; Perusahaan Penerbit SBSN IDR 5.6 Trillion Domestic Sukuk |
Size: | US$650 million Global Sukuk; IDR 5.6 Trillion Domestic Sukuk |
Issuer: | Republic of Indonesia; Perusahaan Penerbit SBSN Indonesia |
Arrangers for Global Sukuk: | Bahana Securities, Barclays Capital, BNI Securities, HSBC Amanah Syariah, Islamic Bank of Asia, Maybank Investment Bank, Standard Chartered |
Legal Counsel for Global Sukuk: | Assegaf Hamzah & Partners, Allen & Overy, Hadiputranto, Hadinoto & Partners, Linklaters Allen & Gledhill |
Arrangers for the Domestic Sukuk: | Andalan Artha Advisindo Sekuritas, Anugerah Securindo Indah, Bahana Securities, Bank Internasional Indonesia, Bank Mandiri, Bank Syariah Mandiri, BNI Securities, CIMB Islamic, Citibank, Danareksa Sekuritas, HSBC Amanah Syariah, Reliance Sekuritas, Trimegah Securities |
Legal counsel for the Domestic Sukuk: | MMIK Law Firm |
United Arab Emirates:
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TDIC Sukuk Limited Trust Certificates
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Size:
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US$1 billion
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Issuer:
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TDIC Sukuk Limited
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Arrangers:
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Abu Dhabi Commercial Bank, HSBC Bank, Standard Chartered Bank
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Legal Counsels:
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Clifford Chance, Linklaters, Maples and Calder
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Abu Dhabi Islamic Bank, DIB Sukuk Company and Al Ghurair Centre were all important UAE deals. In fact, the UAE space was much more active, and Dubai more positive than the press might indicate. In this competitive environment, Tourism Development & Investment Company of Abu Dhabi wins with its creative US$1 billion issuance. Led by Abu Dhabi Commercial Bank, HSBC and Standard Chartered Bank, this transaction represents the opening of the Abu Dhabi market and a unique approach to financing real estate development through the issuance of securities based on diminishing muslaha.