After much anticipation from the global Islamic markets, Luxembourg successfully priced its Sukuk on the 7th October 2014. NABILAH ANNUAR speaks to Rami Falah, the head of Islamic banking at BNP Paribas Najmah Middle East, lead arranger for the issuance, for an insight into this historic deal.
The Grand Duchy launched its EUR200 million (US$253.87 million) Sukuk on the 30th September 2014 at the tight end of initial price guidance of 0-2bps below midswaps. The five-year paper finally priced 0.436% attracting over EUR500 million (US$634.68 million) in orders and was twice oversubscribed. Due to mature on the 7th October 2019, payments to Sukukholders will be made on an annual basis. Luxembourg’s Sukuk achieved several milestones: namely (1) the first sovereign Sukuk from a Eurozone country; (2) the first sovereign euro-denominated Sukuk; (3) the first Sukuk launched by a European sovereign Sukuk issuer with ‘AAA’ rating; and (4) attaining a profit rate between 0 and 2bps below the benchmark mid swap.
Structured in line with the principles of Ijarah, Rami explained that three factors were taken into consideration in selecting the appropriate structure: (1) it is the most acceptable structure among Shariah scholars; (2) the majority of investors are familiar with the Ijarah structure; (3) all sovereigns use Ijarah structure for their debut Sukuk. The paper is issued by the Luxembourg Treasury Securities with the Luxembourg government as its obligor with its proceeds believed to be used for the country’s general budgetary purposes.
The Grand Duchy of Luxembourg
EUR200 million (US$253.87 million)
7th October 2014
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Issuer | Luxembourg Treasury Securities |
Obligor | The Grand Duchy of Luxembourg |
Issuance price | 100% |
Purpose of issuance | The proceeds will be paid to the seller as the purchase price of the leased assets |
Trustee | Luxembourg Treasury Securities S |
Tenor | Five years |
Profit rate | 0.436% |
Payment | Annual |
Currency | Euro |
Maturity date | 7th October 2019 |
Lead managers, structuring advisors and bookrunners | BNP Paribas, HSBC |
Governing law | Transaction documents governed by Luxembourg law. The certificates and the declaration of trust governed by English law |
Legal advisors | Linklaters to the managers & delegate. Allen & Overy to the issuer & Luxembourg |
Listing | Euro MTF (Luxembourg Stock Exchange) |
Rating |
‘Aaa’ (Moody’s)
‘AAA’ (S&P)
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Shariah advisors | Shariah advisors of BNP Paribas & HSBC |
Structure | Sukuk Al Ijarah |
Tradability | Yes |
Face value/minimum investment | Minimum face amounts of EUR100,000 (US$126,936) and integral multiples of EUR1,000 (US$1269.36) |