2016. It was a bad year. But, it was bad in ways that we didn’t expect, and some segments of the Islamic financial markets made major headway. Four clear trends emerged in the 2016 IFN Deals of the Year.
New markets continued to open: Jordan, Togo and Senegal launched their maiden sovereign Sukuk; Sri Lanka’s first domestic Sukuk was issued; ITFC and ICD kept building new markets and building on their prior work; Oz provided a magical journey to commercial real estate finance. Newness, however, remains characterized by slow and steady progress.
We are Tawarruq. 2016 brought innovation and perfection of recent innovations. But, the volume of submissions applying Tawarruq was shockingly overwhelming. The innovation story seemed to be one step forward, two steps backwards.
Whatever the price of oil, whatever the geopolitical challenges, Malaysia, the UAE and Saudi Arabia are the champions. Domestic demand for Islamic finance in these three giants continues to prove rich and active. Indonesia and Pakistan continued to play catch-up. But some of 2015’s rising stars like Turkey have faltered.
Environmental and social impact were noted in a number of deals across categories. For the first time, Islamic finance players and their customers are demonstrating a more clear and systematic focus on doing well for the planet and for people.
Shockingly absent, Europe. Nominations from Luxembourg and London nearly evaporated. Cross-border deals into North America were rare. Housekeeping and austerity took their toll.
Nineteen product categories were contested. Winners came from 10 countries with Malaysia followed by the UAE as the top deal-making countries. Nine currencies were used with the US dollar and Malaysian ringgit the top currencies used in seven and five of the deals respectively. Eight of the winners were Sukuk transactions. Seven were syndicated. Two were bilateral and two were equity. Eleven countries were put to the test. Six currencies were used, but the US dollar was dominant as it was applied in seven of the countries deals.
For a year that everyone thought would have few notable deals, 2016 was a good year after all.
Corporate Finance: Sime Darby |
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Size: |
RM3 billion (US$670.32 million); first issuance RM2.2 billion (US$491.57 million) |
Arrangers: |
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Lawyers: |
Zaid Ibrahim & Co for the arrangers and Wong & Partners (member of Baker McKenzie) for the issuer |
Rating: |
‘AAIS’ by MARC |
Date closed: |
24th March 2016 |
Shariah advisors: |
The endless drone of Tawarruq fueled most corporate finance transactions in 2016. Axiom brought to the fore a program of goods Murabahah support from Noor Bank. Meezan supported key customers like Sui Southern Gas with the development of flexible leasing products. Equate of course relied on steady freddy Tawarruq to fund the Islamic tranche.
Sime Darby turned to deleveraging. Due to rating pressures at the time, Sime Darby wanted to explore a solution to bolster its balance sheet and manage its credit rating. Via the issuance of capital market instruments, Sime Darby wanted a solution which was dual-pronged ie strengthen its balance sheet whilst being able to raise funding cost effectively. This involved a two-pronged approach by this Shariah compliant counter: the first was to issue perpetual Sukuk based on Wakalah Bil Istithmar; the second was to issue new shares worth RM2.36 billion (US$527.32 million) in October 2016.
The Sukuk is the largest perpetual Sukuk issuance globally by a non-bank, the largest ringgit-denominated perpetual Sukuk issuance so far, and the first perpetual Sukuk globally based on the Shariah principle of Wakalah. The Sukuk program revolves around a Wakalah arrangement entered between the Sukuk trustee for the program and Sime Darby, whereby the Sukuk trustee appoints Sime Darby as its agent or Wakeel to perform duties in respect of a basket of Wakalah portfolio, including management of the Wakalah portfolio. The Wakeel’s responsibilities include investment in the Wakalah portfolio and collection and distribution of income generated from the Wakalah portfolio. Sime Darby will issue Sukuk Wakalah to the Sukukholders, and the Sukukholders will subscribe to the Sukuk Wakalah by paying a subscription price.
The structure provides for flexibility in the determination of the Wakalah portfolio and the manner in which the Wakalah portfolio can be acquired by the Wakeel, subject to the compliance of certain asset classifications. For instance, for the initial issuance of the Sukuk Wakalah, the Wakeel, as buyer needed to acquire a certain basket of Ijarah assets from Sime Darby that complied with certain prescribed minimum standards. The Wakeel as lessor will then lease the Ijarah assets to Sime Darby at an agreed rental and tenure with option to renew upon expiry. In addition to using the principles of Ijarah to facilitate the procurement of the Wakalah portfolio, the structure also allows the Wakeel to use the principles of Murabahah for investment into commodity Murabahah investments.
Honorable mention: Axiom Telecoms, Sui Southern Gas and Equate
Ijarah: Tiga Pilar Food Sejahtera |
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Size: |
IDR1.2 trillion (US$89.88 million) |
Arrangers: |
Maybank Kim Eng Securities, Mandiri Sekuritas, OCBC Sekuritas Indonesia, Indo Premier Securities and Danareksa Sekuritas |
Bookrunners: |
Maybank Kim Eng Securities, Mandiri Sekuritas, OCBC Sekuritas Indonesia, Indo Premier Securities and Danareksa Sekuritas |
Legal counsel: |
Tumbuan & Partners for the issuer |
Rating: |
‘idA’ by PEFINDO |
Date: |
19th July 2016 |
Shariah advisors: |
Digi Laras Prosperindo (Iggi H Achsien) |
Even if Tawarruq was widely applied, Ijarah deals were a close second. Complex deals were done to facilitate the leasing of 11 airliners to Saudi Arabian Airlines by International AirFinance Corp. Sovereigns still prefer Ijarah for their initial launch deals as was the case with Jordan, Togo and Senegal. Tiga Pilar Food Sejahtera returned to the market with the largest Indonesian ruppiah issuance for 2016. The transaction refinanced the obligor’s existing debt and provided for future working capital needs. The firm, which brands itself TPS, is the leading consumer goods player in Indonesia. TPS produces and distributes basic consumer food products including egg noodles, instant noodles, rice noodle, snacks and candy.
An important observation is that previously Ijarah deals were not considered easy to execute in the Indonesian securities market. This deal by prominence and size demonstrates that key impediments to Sukuk Ijarah have been overcome.
Honorable mention: International AirFinance Corp and Jordanian Company for Islamic Sukuk for Financing Government Projects
Cross-Border: Thar Block Ii |
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Size: |
US$1.52 billion |
Arrangers: |
Mining Project: China Development Bank Corporation (Lead arranger of US dollar-denominated tranches) and Bank Alfalah, Habib Bank, United Bank, Faysal Bank (Lead arrangers of rupee-denominated tranches) Power Project: China Development Bank Corporation (Lead arranger of US dollar-denominated tranches) and Habib Bank (Lead arranger of rupee-denominated tranches) |
Lawyers: |
Pinsent Masons (Lead counsel to the project companies) and HaidermotaBNR & Co (Pakistan counsel to the project companies) Linklaters (Lead counsel to the arrangers) and Vellani and Vellani (Pakistan counsel to the arrangers) |
Date: |
4th April 2016 |
Guarantor: |
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Shariah advisors: |
Internal Shariah boards of Islamic facility providers |
2016 was a good year for cross-border transactions. These included Malaysian capital flowing into Africa. Cagamas returned to the international market with a Singapore dollar issuance; but, China’s One Belt and One Road Initiative finally included Islamic finance for the financing of Thar Block II.
Thar is a 3.8Mt/a coal mining project and 2x330MW coal-fired power project in Pakistan. Each financing comprised a mix of Chinese credit under Sinosure cover and conventional and Pakistan rupee tranches. The use of Islamic tranches to finance these projects demonstrates the immense importance of Islamic liquidity in current market conditions. Islamic financing was provided under the Musharakah structure by a syndicate of Pakistani banks (Habib Bank, Meezan Bank and Faysal Bank) and sat neatly with the conventional tranches under the head of a common terms agreement.
The Thar projects represented a greater than usual set of ‘firsts’. It was the first power project in Pakistan to utilize indigenous coal reserves and as such, marks a new era of energy security and economic development in Pakistan. It was also the first project financing of a mine project in Pakistan. It was also China Machinery Engineering Corporation’s first major overseas investment project.
The financing involved a comprehensive suite of security being taken by the lenders. Some of the relevant secured assets such as the project accounts were located offshore in the Dubai International Financial Center (DIFC). Due to Pakistani stamp duty regulations, the signing of the transaction documents also took place in the DIFC.
Honorable mention: Yinson Production and Cagamas Singapore dollar Sukuk
Commodity Murabahah: Al Dzahab Assets |
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Size: |
RM900 million (US$201.1 million) of which RM155.48 million (US$34.74 million) Class A and RM181 million (US$40.44 million) Class B |
Arrangers: |
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Lawyers: |
Adnan Sundra & Low for the arrangers |
Rating: |
Class A: ‘AAA/Stable’; Class B: ‘AA3/Stable’; and Class C: unrated |
Date: |
21st June 2016 |
Shariah advisor: |
Dr Mohd Daud Bakar |
Tawarruq was the most highly nominated category. Key market players like Al Rajhi arranged a commodity Murabahah financing for Yanbu Aramco Sinope Refining. In project financing, Tawarruq allows project financing like Sarawak Hidro to proceed with draws akin to traditional project finance. In the Al Dzahab Assets’s deal, the process is used to facilitate asset securitization.
Al Dzahab’s proceeds allow the purchase of all the rights, benefits, titles and interests to and under the Islamic personal financing agreements entered into between various Malaysian cooperatives and their customers. These asset-backed securities facilitate the extension of credit into markets that banks frequently miss and increase economic inclusion.
In addition to its high level of structuring with three classes, the program’s originator retains an option (in the form of a clean-up call) to repurchase all outstanding obligations sold to the issuer upon occurrence of certain events, if it desires. Dzahab is the first non-property related asset-backed securitized Sukuk, pipping Ziya Capital by two months. Dzahab is also the first asset-backed security issued by a non-government linked company in the Malaysian capital market.
Honorable mention: Sarawak Hidro, Yanbu Aramco Sinope Refining
Most Innovative: Ziya Capital |
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Size: |
RM20 billion (US$4.47 billion); first tranche: RM900 million (US$201.1 million) comprising RM630 million (US$140.77 million) senior Sukuk and RM270 million (US$60.33 million) subordinated Sukuk |
Lead arranger: |
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Lead manager: |
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Legal counsel: |
Zaid Ibrahim & Co for arranger |
Rating: |
Unrated |
Date: |
12th August 2016 |
Shariah advisors: |
Dr Shamsiah Mohamad and Mohd Fadhly Md Yusoff |
Much of the innovation in 2016 involved expanding tested concepts into new applications. DP World took the well tried concept of selling capacity into port throughput. The government of Malaysia also broadened its use of the same concept. These concepts turned heavily on the use of the seller as Wakeel or agent to deliver the services to third parties on behalf of the investors.
MUFG implemented Malaysia’s first Islamic auto securitization under a Wakalah Bil Istithmar. The program is a multi-source program with different Shariah compliant auto financiers delivering assets into the conduit. The program is one of the few asset-backed Islamic securitization transactions. The originator and seller in the first issuance was CIMB Islamic Bank. The purchases are funded by paired issuances of senior and subordinated Sukuk by the issuer. The proportions of the senior and subordinated Sukuk may vary. Although the program began with auto transactions, the universe of eligible ‘Islamic receivables’ may include trade receivables, corporate financing, Islamic credit cards, hire purchase financing, commercial financing and leases, inventories, project cashflows, etc.
Although Malaysia permits Bai Al Dayn, the Wakalah Bilistithmar structure facilitates buying ‘Ayn’ such as the property in Ijarah and Musharakah transactions. The concept may be copied for application in other jurisdictions. BTMU, the first Japanese bank appointed as lead arranger for such a program, hopes that this will help launch a more active Islamic asset-backed securities market in Malaysia.
Honorable mention: Al Dzahab Assets, DP Crescent World and Malaysia Global Sukuk
Sovereign: Jordanian Company for Islamic Sukuk for Financing Government Projects |
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Size: |
JOD34 million (US$47.81 million) |
Arrangers: |
Islamic Corporation for the Development of the Private Sector, Japan International Cooperation Agency |
Lawyers: |
Dentons for the arrangers |
Guarantor: |
The Hashemite Kingdom of Jordan, acting through the Ministry of Finance (Obligor) |
Rating: |
Unrated |
Date: |
17th October 2016 |
Shariah advisors: |
The Fiqh Academy with the Central Sharia Scholars Committee (CSSC) of Jordan |
Although Malaysia and Indonesia returned to the markets, they built on tried and true methods. Jordan, however, came to market with its first sovereign Sukuk which issuance bears a number of unique features that may influence the evolution of the Islamic capital markets. For instance, the issuing special purpose company covers its expenses by a deduction from the periodic payments. The deduction is subject to a ceiling. Another factor is that the rental stream is not based on a central bank benchmark, but the fair value of the rental payment. This led to the formation of an Expert Advisory Committee to conduct a study of the underlying asset and advise on the rental payment. A third innovation was that the investors would subscribe to the deal based on an expected yield, not the final yield. This left the investors to negotiate with the obligor once the deal was closed.
In the process of this project, the Jordanian scholars had to be convinced about using an asset under construction as an underlyer. The IDB Group Shariah Committee provided assistance in resolving this in the affirmative. This led to a need to address the forbidding of sale and leaseback under Jordan’s Leasing Law. As part of the comprehensive reforms required for this deal, the Japan International Cooperation Agency provided a technical assistance package.
The transaction now establishes a benchmark Sukuk Ijarah for the Jordanian market and a risk-free reference rate for the section. Key innovations in the structure may lead to new developments in the global Sukuk market.
Honorable mention: Malaysia Global Sukuk and Perusahaan Penerbit SBSN Indonesia III
Musharakah: Noman Group |
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Size: |
US$32 million |
Arrangers: |
Standard Chartered Bank and Islamic Corporation for the Development of the Private Sector |
Lawyers: |
Clifford Chance and Syed Ishtiaq Ahmed & Associates as local Bangladeshi counsel for the arrangers and Legal Shelter for the obligor. |
Date: |
23rd October 2016 |
Shariah advisors: |
Shariah committees of the arrangers |
South Asian deals frequently feature Musharakah and diminishing Musharakah deals. Lalpir returned to the market in 2016. New deals were seen in Indonesia like Jaya Marga Persero.
The Ismail Spinning transaction brings the Noman Group, one of Bangladesh’s largest textile groups, within the Islamic finance ambit. The transaction represents Ismail Spinning’s first club or syndicated facility structured on a Shariah compliant basis. The facility enabled Ismail Spinning to diversify its financier base by attracting new banking relationships from abroad.
The facility was structured as a diminishing Musharakah with the financiers sharing in the company’s machinery.
Honorable mention: Jasa Marga Persero and Lalpir
Equity & IPO: Middle East Healthcare Company |
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Size: |
SAR1.8 billion (US$479.34 million) |
Arranger & bookrunner: |
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Lawyers: |
The Law Office of Salman Al-Sudairi in association with Latham & Watkins advised the issuer. Clifford Chance advised the arranger. |
Date: |
3rd March 2016 |
IPOs took their time to come to market in 2016. Eventually two prominent deals hit the Saudi market: Middle East Healthcare Company (MEAHCO) and Riyadh REIT. Elsewhere on the equity front, Sime Darby came to market with perpetual and secondary issuances. And, Khazanah Nasional monetized part of their holding in Tenaga Nasional.
MEAHCO went IPO in what is the largest IPO by a Saudi Arabian healthcare company. This sector is hot in the GCC. MEAHCO has long been a key player in the Saudi market. MEACHO owns and operates hospitals under the Saudi German Hospitals brand name in Saudi Arabia and is an affiliate of the Bait Al Batterjee Medical Co. The IPO was the outcome of two years effort in the reorganization of the former Saudi German Hospitals Group which operates in Jeddah, Riyadh, Madinah and Aseer with new hospitals under development in Dammam and Hail. MEAHCO is a fully Shariah compliant company and therefore the transaction had to comply with all Shariah bylaws of the company making it particularly complex.
Honorable mention: Sime Darby and Riyadh REIT
Sukuk: Sukuk Ijarah of Al-Falaah, Islamic Business Unit of LOLC Finance |
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Size: |
LKR500 million (US$3.25 million) |
Arranger: |
Trillion Investments |
Bookrunner: |
|
Lawyers: |
Nithya Partners for the arranger and issuer |
Rating: |
Unrated |
Date: |
4th August 2016 |
Shariah advisor: |
Shariah Supervisory Board of Al-Falaah, Islamic Business Unit of LOLC Finance |
Jordan blazed the trail with a novel sovereign Sukuk structure; DP World tested a new concept under the Wakalah structure; and, Al-Falaah opened the Sri Lankan market another crack. The deal is small. Yet, it is the first Sukuk of any kind issued in Sri Lanka. Despite discussions that the government might issue, this Ijarah transaction is for a local leasing company. The deal is expected to provide a roadmap for future issuances in Sri Lanka.
Honorable mention: Jordanian Company for Islamic Sukuk for Financing Government Projects and DP World Crescent Sukuk
Size: |
EGP2 billion (US$111.06 million) |
Arrangers & bookrunners: |
Société Arabe Internationale de Banque & Industrial Development & Workers Bank of Egypt and Abu Dhabi Islamic Bank — Egypt |
Date: |
February 2016 |
Guarantor: |
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Shariah advisors: |
Abu Dhabi Islamic Bank — Egypt |
Most Mudarabah deals have been investments in the Tier I and Tier II capital of Islamic banks. This applied respectively to our runners-up Boubyan Bank and Meezan Bank. Abu Dhabi Islamic Bank — Egypt (ADIB Egypt) has been quietly perfecting the method in the local market.
In this case, ADIB Egypt syndicated a Mudarabah with conventional banks in order to partially finance the emergency plan of the electricity sector in Egypt. The funds support the upgrading of the electricity transmission network.
As the biggest Mudarabah transaction completed in Egypt, the deal is the first syndicated Mudarabah facility for the Egyptian Electricity Transmission Co. ADIB Egypt’s syndicate was selected in an intense competition with conventional banks.
Based on the success of the nominated deal, the obligor returned to ADIB Egypt for a second syndication in September 2016. The performances indicate that the emerging Islamic finance institutions in Egypt can compete head to head with the leading conventional banks.
Honorable mention: MBL Tier II Mudarabah Sukuk and Boubyan Tier 1 Capital SPC
Structured Finance & Trade Finance: Government of Senegal As Beneficiary, And Sonacos (Formerly Suneor) As Executing Agency |
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Size: |
US$75 million |
Arrangers: |
Islamic Corporation for Trade Finance (ITFC) |
Lawyers: |
Dentons for the arrangers |
Rating: |
Unrated |
Date: |
21st February 2016 |
In 2016, there were a number of attractive structured finance deals like Al Dzahab and Ziya Capital. The IDB Group’s ITFC plays an important part in breaking the ground for new markets. The typical ITFC deal requires updates in local laws, the introduction of new techniques and a focus on key development sectors linked to import and export finance.
ITFC purchases groundnuts and the processing of groundnut oil and cake for export by Sonacos, the leading actor in the sector. Groundnuts are a strategic commodity for Senegal: up to 40% of the population is dependent on this cash crop commodity for their livelihood. Growth in groundnut oil and cake exports will improve the country’s overall export revenues and employment level, thus contributing to poverty alleviation.
The procedures involve ITFC providing liquidity to local farmers and cooperatives by purchasing groundnuts for delivery to Sonacos. In accordance with an Islamic tolling arrangement, ITFC pays a tolling fee to Sonacos for the processing of the groundnuts into groundnut oil and cake, both which are exported (the cake is used as animal feed). The final products are then sold under Murabahah contracts with the proceeds from the export sales assigned to ITFC.
The security package of this self-liquidating structure is strengthened by the fact that the final products are put under Collateral Management Agreement (CMA) from their production until their final export. A third party collateral manager oversees the management of the goods until export. The above enhancements (assignment of proceeds, CMA) are additional securities in addition to the sovereign backing of the government of Senegal.
The deal was challenging as the sector was facing difficulties. The main actors faced financial deterioration due to a downward trend in market prices. ITFC was able to provide a unique and tailor-made pre-export structured commodity trade finance program.
Honorable mention: Axiom Telecoms and Ziya Capital
Real Estate: Emaar Sukuk |
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Size: |
US$750 million under US$2 billion program |
Arrangers: |
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Bookrunners: |
National Bank of Abu Dhabi (NBAD), Arab Banking Corporation, Dubai Islamic Bank (DIB), Emirates NBD, First Gulf Bank, Mashreqbank, Noor Bank, SCB and Union National Bank |
Legal counsel: |
Linklaters and Maples and Calder (Dubai) for the issuer and Allen & Overy for the bookrunners. |
Rating: |
|
Date: |
7th September 2016 |
Shariah advisor: |
Real estate will always be the top category for Islamic investors. The love of tangible assets with predictable cash flows has a strong allure whether one invests at home as with the Ezdan Sukuk Company or abroad as with GFG CI-1. In 2016, the consensus real estate deal of the year is Emaar Sukuk.
Emaar Sukuk represents Emaar Properties’s return to the Islamic capital markets following a four-year hiatus. The deal bears the lowest coupon ever achieved for a 10-year international Sukuk by a UAE corporate issuer as well as the longest dated senior Sukuk from the MENA region in 2016. The structure blends Ijarah (51% of the deal) and Tawarruq legs under a Wakalah. These Sukuk Wakalah incorporated the Tawarruq leg to allow the deal to be upsized and to reduce reliance on the firm’s tangible assets. This eases the way for Emaar to apply the proceeds with greater flexibility.
Honorable mention: GFG CI-1 and Ezdan Sukuk Company
Hybrid: Six Flags (Dubai Parks & Resorts) |
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Size: |
AED993 million (US$270.28 million) |
Arrangers: |
Dubai Islamic Bank, Abu Dhabi Commercial Bank, Sharjah Islamic Bank |
Lawyers: |
Linklaters for the arrangers and Allen & Overy for the obligor |
Rating: |
Unrated |
Date: |
21st February 2016 |
Shariah advisor: |
Shariah committees of arrangers |
Khazanah Nasional returned to market with a new exchangeable. The structure took a turn by using an unexpected form of security into which investors could exchange their obligations. Barwa Bank issued a hybrid Mudarabah/Wakalah security.
Dubai Islamic Bank, however, syndicated a hybrid for the proposed Six Flags-branded theme park. Scheduled to open in late 2017, the project financing includes a combination of debt and equity. Dubai Parks and Resorts has issued rights for 37% of the deal and the banks provided the balance in the form of Tawarruq. This is unusual from two perspectives: the deal is not a Sukuk facility with two or more operational contracts like Mudarabah in business operations and a Wakalah to do Tawarruq; and, the deal runs a rights issuance in parallel to the debt in lieu of having all of the obligor equity in place.
Honorable mention: BBG Sukuk (Barwa Bank) and Bagan Capital (Khazanah)
Regulatory: Mumtaz |
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Size: |
RM300 million (US$67.03 million) |
Arrangers: |
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Bookrunners: |
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Lawyers: |
Shook Lin & Bok for the issuer and Adnan Sundra & Low for the arrangers |
Rating: |
‘AA3(s)’ by RAM Ratings |
Date: |
20th June 2016 |
Shariah advisors: |
Mumtaz represents the first time that a development finance institution has issued regulatory capital instruments in Malaysia. The obligor is Bank Rakyat which currently operates under Basel I. Bank Negara Malaysia has mandated that Bank Rakyat prepare for Basel III compliance. These Tier 2 subordinated Sukuk serve as the strategic step for the bank to meet Basel III requirements.
Honorable mention: Boubyan, Ahli United Bank, Qatar Islamic Bank and Qatar International Islamic Bank
Social Impact: Government Of Senegal As Beneficiary, And Sonacos (Formerly Suneor) As Executing Agency |
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Size: |
US$75 million |
Arrangers: |
Islamic Corporation for Trade Finance |
Lawyers: |
Dentons for the arrangers |
Rating: |
Unrated |
Date: |
21st February 2016 |
Social Impact nominations in 2016 lacked the glitz of Khazanah’s 2015 winner. 2016 is the year of steady goes the game. Sime Darby TNBES Renewable Energy will make its impact felt over an extended period. ADIB Egypt’s syndication for the Egyptian Electricity Transmission Company provides key assistance in the improvement of electricity transmission for millions of Egyptians. ITFC’s financing of government of Senegal as beneficiary and Sonacos has an immediate impact on the daily lives of millions of Senegalese connected to each step of the groundnut industry. Beyond its immediacy, the financing is sustainable and replicable. More critically, the process may be applied to other commodities and products in Senegal and elsewhere. This points the way for Senegal to diversify its economy and ITFC to continue improving lives in more emerging markets.
Honorable mention: Sime Darby TNBES Renewable Energy and Egyptian Electricity Transmission Company
Syndicated: Emirates Global Aluminium |
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Size: |
US$1.23 billion Islamic tranche of US$4.9 billion facilities |
Arrangers: |
Dubai Islamic Bank, Emirates NBD, National Bank of Abu Dhabi, BNP Paribas, Citibank, ING, Natixis, APICORP, Export Development Canada, Masheqbank, Kuwait Finance House |
Bookrunners: |
Dubai Islamic Bank, National Bank of Abu Dhabi, Citibank, BNP Paribas, Emirates NBD, ING, Natixis |
Lawyers: |
Allen & Overy for the obligor and Clifford Chance for the arrangers |
Rating: |
Unrated |
Date: |
17th February 2016 |
Shariah advisor: |
Al Rajhi led the SAR6 billion (US$1.6 billion) syndication for Yanbu ARAMCO SINOPEC Refining Co in a domestic syndication. Noor pulled together a purely Islamic syndicate for Axiom Telecom. Emirates Global Aluminium (EGA) required a high level of complex coordination to pull together Islamic and conventional banks along with export credit agencies for the largest co-financing syndication in the UAE since 2008. The sovereign wealth funds of Abu Dhabi and Dubai own EGA. The deal consolidates the merged entity’s project financing liabilities which had been arranged in 2007 and 2012. The facility was initially underwritten by the seven initial mandated lead arrangers and bookrunners, which was then syndicated to the wider bank group. The transaction simplified EGA’s corporate financing structure and is expected to pave the way for a capital markets issuance. The deal brought in new financiers to EGA.
A key element of the transaction was the establishment of EGA as the primary funding vehicle of the EGA Group as part of the merger which created EGA. The company has helped the UAE to become the 4th largest aluminum-producing country in the world.
Honorable mention: Axiom Telecom and Yanbu ARAMCO SINOPEC Refining Co
PERPETUAL: Qatar Islamic Bank |
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Size: |
QAR2 billion (US$548.88 million) |
Arrangers: |
Direct placement |
Bookrunners: |
Direct placement |
Lawyers: |
Allen & Overy for the issuer |
Rating: |
Unrated |
Date: |
July 2016 |
Shariah advisor: |
Qatar Islamic Bank’s Shariah Supervisory Board chaired by Sheikh Walid Hadi |
Qatar Islamic Bank returned to market with their second additional Tier I Sukuk issuance. The unlisted transaction is structured to comply with Basel III, the voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk, which was implemented in Qatar by the Qatar Central Bank in January 2014. The Sukuk Mudaraba include a Shariah compliant write-down provision as required by Basel III. This applies should the bank face a non-viability event. Closing in July 2016, the deal just pipped Qatar International Islamic Bank’s first ever Basel III-compliant Tier I Sukuk.
Size: |
Confidential |
Arranger: |
|
Lawyers: |
|
Rating: |
Unrated |
Date: |
5th April 2016 |
Shariah advisor: |
Supervisory Board of Noor Bank |
We are mostly familiar with the Murabahah legs in Tawarruq. In 2016, ITFC built on its impressive record in Africa using Murabahah to supply or export goods. In the UAE, Noor Bank syndicated a deal for Axiom Telecom with Al Hilal Bank, Dubai Islamic Bank and Qatar Islamic Bank.
Axiom Telecom is a household name in the UAE. Noor Bank used ‘goods Murabahah’ to assist Axiom Telecom with meeting its working capital requirements. This differs from commodity Murabahah or Tawarruq — in the latter, the customer seeks cash. In Noor’s program, Noor as an investment agent for the syndicate buys the specific goods like mobile phones from pre-approved vendors. The phones are then sold onward to customers on a cost-plus-profit basis. The customer pays on deferred basis.
Goods Murabahah is familiar in the retail and SME markets but its application in a large syndicated deal is unusual. Advantages of using goods Murabahah include its diversified obligor universe. Finally, the secured program is preferred to Tawarruq by many Shariah councils because it is based on the physical movement of goods desired by the end buyer.
Honorable mention: Government of Mauritania and government of Senegal (Sonacos)
Restructuring: National Titanium Dioxide Company (Cristal) |
|
Size: |
SAR6.96 billion (US$1.85 billion) |
Bookrunners: |
Alinma Bank, Bank AlJazira, Bank Saudi Fransi, JPMorgan, Riyad Bank, Samba Financial Group, The Saudi British Bank, Saudi Hollandi Bank, Saudi Investment Bank |
Lawyers: |
Khoshaim & Association in cooperation with Allen & Overy for the arrangers and Latham Watkins for the obligor |
Guarantor: |
Limited support provided by the National Industrialization Company |
Rating: |
Unrated |
Date: |
25th September 2016 |
Shariah advisors: |
Shariah committees of all bookrunners |
Restructuring fell into two buckets in 2016, the first was the reorganization of truly challenging businesses like Limitless; the second was the reorganization of the finances of companies affected by declining commodity prices, but not themselves affected; this included Ma’aden and Cristal.
Cristal involved a number of important steps in the consolidation of various funded and unfunded bilateral facilities under a common terms agreement. The facilities were then restructured into a two-tranche syndicated Murabahah facility and a separate two-tranche Bai Al-Ajal facility with various ancillary facilities (with one tranche under each of the facilities benefiting from credit support).
The syndicated Murabahah and Bai Al-Ajal agreements have a bullet repayment at the end of the third year. Cristal has an option to extend for an additional two years if certain conditions are met. The structure and covenants allow the company breathing space to recover from the extended dip in the commodity cycle. The transaction does not have asset security, but it enjoys support from its 79% shareholder The National Industrialization Company.
Honorable mention: Limitless and Ma’aden Phosphate Company
Infrastructure & Project Finance: Sime Darby TNBES Renewable Energy |
|
Size: |
RM35.3 million (US$7.89 million) composed of RM28.9 million (US$6.46 million) term-financing and RM2.4 million (US$536,253) trade finance |
Arrangers: |
|
Lawyers: |
Wong and Partners for the issuer and ZUL RAFIQUE & partners for the arranger |
Guarantor: |
|
Rating: |
Unrated |
Date: |
April 2016 |
Shariah advisors: |
Project and infrastructure typically take us to mega projects. Certainly KNPC’s Clean Fuels deal and Lebuhraya DUKE Fasa 3 fit in the mega category as does Yanbu Aramco Sinope Refining. This year’s best project deal is closer to the micro level. TNB Energy Services and Sime Darby Plantation teamed up to build power plants which will be capable to develop renewable energy using biogas converted from palm oil mill effluent.
Up until now, the palm oil industry has faced a number of environmental challenges. One persistent problem has been the disposal of palm oil mill waste. This project addresses the problem by generating a cleaner source of energy. The project is sustainable, leading to a green certification from the Malaysian Green Technology Corporation.
The Tawarruq facilities finance up to 80% of the project costs of the development and construction of biogas power plants owned by Sime Darby TNBES Renewable Energy as well as working capital purposes, the importation of local purchases of Shariah compliant trade-related goods and for the issuance of security deposit, tender bonds, performance bonds and other guarantees.
Honorable mention: KNPC Clean Fuels, Lebuhraya DUKE Fasa 3 and Yanbu Aramco Sinope Refining
Indonesia: Perusahaan Penerbit SBSN Indonesia III |
|
Size: |
US$25 billion dual tranche comprising of a US$750 million five-year facility and US$1.5 billion 10-year paper |
Arrangers: |
Standard Chartered Bank, Citi, CIMB, Deutsche Bank, and Dubai Islamic Bank |
Lawyers: |
Allen & Overy (English & US Law) and Hadiputranto, Hadinoto & Partners member Baker McKenzie (Indonesian Law) for the arrangers and Clifford Chance (English Law) and Assegaf Hamzah & Partners (Indonesian Law) for the issuer |
Rating: |
|
Date: |
21st March 2016 |
Shariah advisors: |
Shariah committees of Standard Chartered Bank, CIMB Islamic Bank, Citi Islamic Investment Bank, Deutsche Bank and Dubai Islamic Bank |
Slowly but surely, the Republic of Indonesia is claiming an important role in Islamic finance. Tiga Pilar Food Sejahtera and Jasa Marga Persero were cases of increasing corporate appetite for Islamic finance. The Republic itself has proven an adept and active issuer.
Perusahaan Penerbit SBSN Indonesia III achieved several landmarks: largest deal out of Asia in 2016; largest ever US dollar sovereign Sukuk in Asia; first Sovereign US dollar Sukuk issued this year; and the Republic’s first dual tranche US dollar Sukuk; and the Republic’s largest ever US dollar Sukuk.
The program permits the Republic to issue both Ijarah and Wakalah series of certificates. This issuance is under the Wakalah series, which is underpinned by a Shariah compliant portfolio of certain state-owned real properties (the Ijarah assets) with no less than 51% of the Sukuk proceeds used by the issuer to procure such Ijarah assets and beneficial rights (Hak Manfaat) in certain identified assets that are either under construction or to be constructed (the project assets) and which shall be delivered on a future date upon completion. The Hak Manfaat are restricted to 49% of the issuance.
The Hak Manfaat represent a new development within the Indonesian market.
Honorable mention: Jasa Marga Persero and Tiga Pilar Food Sejahtera
Malaysia: Sime Darby TNBES Renewable Energy |
|
Size: |
RM35.3 million (US$7.89 million) composed of RM28.9 million (US$6.46 million) term-financing and RM2.4 million (US$536,253) trade finance |
Arranger: |
|
Lawyers: |
Wong and Partners for the issuer and ZUL RAFIQUE & partners for the arranger |
Guarantor: |
|
Rating: |
unrated |
Date: |
April 2016 |
Shariah advisors: |
Malaysia remains the most dynamic Islamic finance market. A hub of innovation, Malaysia enjoys the highest volume production of Sukuk year in and year out. In 2016, small is beautiful. The joint effort of TNB Energy Services and Sime Darby Plantation to build renewable energy power plants using biogas converted from palm oil mill effluent is the winner.
The deal represents the conjunction of two of Malaysia’s most visible industries: palm oil and Islamic finance. On the one hand, the palm oil industry has to overcome many SRI issues including the management of its waste. On the other hand, the Islamic finance industry as a whole is often seen as not fully embracing social, environmental and sustainable projects. In this financing, Islamic finance is directly engaged in a socially relevant environmentally sound project that it sustainable. And, how so? Islamic finance assists in the conversion of palm oil mill waste into a cleaner source of energy. Certified by the Malaysian Green Technology Corporation, Sime Darby TNBES Renewable Energy is the Malaysian deal of the year.
Honorable mention: Al Dzahab Assets, Malaysian Sovereign Sukuk, Purple Boulevard, Ziya Capital and Sime Darby
Pakistan: Power Holding |
|
Size: |
PKR25 billion (US$238.32 million) |
Arrangers: |
Meezan Bank, Dubai Islamic Bank Pakistan and Bank Islami Pakistan |
Lawyers: |
Ahmed and Qazi for the arrangers |
Rating: |
Unrated |
Guarantor: |
|
Date: |
April 2016 |
Shariah advisor: |
Shariah committee of Meezan Bank |
Thar Block II represented an outstanding example of cross-border cooperation. The Islamic Republic of Pakistan’s third international Sukuk was a successful replication of previous Sukuk. Meezan Bank is the power house of innovation in an increasingly dynamic Pakistani market. In this case, Meezan led a syndicated long-term Wakalah Bil Istismaar financing for Power Holding (PHPL).
PHPL is a government of Pakistan holding company which accesses the financial markets to fund Central Power Purchasing Agency Guarantee (CPPA). Providing an Islamic finance structure to PHPL was a challenge. The solution was for the financiers to appoint PHPL as their agent for onward investment in the purchase and sale of electricity.
Subsequently, PHPL entered into a Wakalah agreement with the CPPA to purchase electricity generated from different sources (first priority will be from hydro power plants (cheapest source), next is nuclear then thermal and so on.) As agent of financiers and PHPL, CPPA will sell this electricity to distribution companies for onward distribution to end consumers.
The CPPA will provide semi-annual accounts to the financiers to provide a complete picture of the business’ profitability. At an agreed semi-annual date, the financiers will redeem their Wakalah investments and receive a distribution of profits.
Honorable mention: The Third Pakistan International Sukuk Company and Thar Block II
UAE: DP World Crescent |
|
Size: |
US$1.2 billion under US$3 billion program |
Arrangers: |
Citigroup Global markets, Deutsche Bank (London branch), Dubai Islamic Bank, Emirates NBD, First Gulf Bank, HSBC Bank, Barclays Bank (appointed as dealers for the day), JPMorgan Securities (appointed as dealers for the day), National Bank of Abu Dhabi (appointed as dealers for the day) and Société Générale (appointed as dealers for the day) |
Bookrunners: |
Barclays Bank, Citigroup Global Markets, Deutsche Bank, Dubai Islamic Bank, Emirates NBD Capital, First Gulf Bank, HSBC Bank, JPMorgan Securities, National Bank of Abu Dhabi and Société Générale |
Lawyers: |
Linklaters for the arrangers and Clifford Chance with Conyers Dill & Pearman for the issuer |
Rating: |
‘Baa3’ by Moody’s and ‘BBB-’ by Fitch |
Guarantor: |
DP World as obligor |
Date: |
31st May 2016 |
Shariah advisors: |
Shariah committees of Citi Islamic Investment Bank, HSBC Saudi Arabia, Dubai Islamic Bank, First Gulf Bank and Dar Al Sharia |
If Malaysia is the market leader: watch out because the UAE is sprinting to catch up. Innovation and volume are always hallmarks of the UAE market. Major deals like Six Flags and Emirates Global Aluminum were syndicated. Noor Bank led the Axiom goods Murabahah syndication. Emaar, Noor and Etihad Airways all issued Sukuk. And, DP World returned to market.
DP World is one of the largest container terminal operators in the world by capacity and throughput. DP World is also one of the most geographically diversified. This transaction was the groundbreaking return to the market of DP World after nine years.
This RegS/144A Sukuk transaction was issued on the back of a highly successful tender offer on the outstanding DPW US$1.5 billion 2017 Sukuk certificates. The aim of the transaction was to optimize the issuers funding through the tender and new issue process. It helped DPW achieve their strategy of building a liquid curve to better reflect the strength of their credit.
The Sukuk Wakalah are based on throughput services. These comprise loading, off-loading, storing and delivering containers at various terminals owned or operated by the company in the UAE.
Honorable mention: Axiom Telecoms, Emaar Sukuk and Six Flags
Saudi Arabia: Jabal Omar Development Co |
|
Size: |
SAR8 billion (US$2.13 billion) |
Arrangers: |
|
Lawyers: |
Allen & Overy for the obligor and Clifford Chance for the arrangers |
Rating: |
Unrated |
Date: |
January 2016 |
Shariah advisor: |
Shariah committees of the arrangers |
The Saudi Arabian market seems to be swimming in Tawarruq. But, Jeddah Economic City Real Estate Fund and International AirFinance Corp showed some independence and branched respectively into diminishing Musharakah and Ijarah. Middle East Healthcare Company, of course, was an equity deal. For much of the past 10 years, the question of how to redevelop Jabal Omar, a mountain near the Haram Sharif in Makkah, has dogged financiers.
The current transaction represents an expanded facility based on Istisnah-Ijarah Mawsufah Fil Dhimah. The original transaction was meant to be a SAR2 billion (US$532.61 million) multi-tranche facility. The final deal is SAR8 billion which funds the mixed use project. The project comprehends three of the seven phases. This involved complexity in dealing with the different phases in the same operating company and contractually ring-fencing the security and cash flows from each phase in the wider project. The ultimate project includes hotel, retail and residential elements.
Honorable mention: Jeddah Economic City Real Estate Fund, International AirFinance Corp and Middle East Healthcare Company
Oman: Mohammed Al Barwani Sukuk |
|
Size: |
US$51.020 million and OMR9.86 million (US$25.51 million) |
Arrangers: |
|
Lawyers: |
Allen & Overy and Trowers & Hamlins for the arrangers; Dentons for the issuer |
Rating: |
Unrated |
Date: |
29th June 2016 |
Shariah advisors: |
Shariah Supervisory Committee of Standard Chartered Bank and Amanie Shariah Supervisory Board |
In 2016, Bank Muscat Meethaq continued being a juggernaut as the largest player in Islamic banking. Their financing for Sebacic involved an Ijarah Mawsufah Fi Dhimmah. Oman Shipping also enjoyed a landmark Musharakah funding. And, the Sultanate returned to the markets. Mohammed Al Barwani Holding, a diversified natural resources company, became the first issuer to apply the Sultanate’s new Sukuk regulations.
The Barwani Sukuk issuance utilizes a Wakalah structure. The issuer special purpose company purchased a portfolio of assets and engaged Barwani as servicing agent. The assets included income-generating real estate assets and shares. This is the first time that a Wakalah structure has been used in Oman. This required an extensive analysis of Omani law to determine whether the key cash flows in such a structure would be enforceable from a local law perspective. This structure now paves the way for Omani Islamic banks and corporates to utilize this type of structure for future Sukuk issuances.
The Barwani transaction also achieves another milestone as the first dual tranche (Omani rial and US dollar) Sukuk issuance in Oman. Oman’s local clearing system, the Muscat Clearing and Depository Company, clears and settles the US dollar-denominated Sukuk for the first time. The Sukuk will also be listed on the newly established Bond and Sukuk Market pursuant to the amendments made to the Executive Regulations of the Capital Markets Law in June 2016.
Honorable mention: Sebacic Oman and Oman Shipping Co
Kuwait: Boubyan Tier 1 Capital SPC |
|
Size: |
US$250 million |
Arrangers: |
Boubyan Capital, Dubai Islamic Bank, Emirates NBD Capital, HSBC, KFH Capital, National Bank of Kuwait, Standard Chartered Bank |
Lawyers: |
Allen & Overy, Meysan Partners for the arrangers and Dentons and Al Tamimi & Co for the issuer |
Rating: |
Unrated (obligor rating ‘A+’ by Fitch and ‘Baa1’ by Moody’s) |
Date: |
16th May 2016 |
Shariah advisors: |
Sharia committees of Boubyan Bank, DIB, HSBC, KFH Capital, Standard Chartered Bank |
KNPC Clean Fuels and Equate show the demand for syndicated finance in Kuwait. In the meantime, the Capital Markets Authority of Kuwait (CMA) has established a robust framework for the launch of Islamic securities. Boubyan Bank provided some of the first clear applications of the framework. In the process, Boubyan’s issuance was the first ever fully Basel III-compliant public Sukuk issue in the world.
As Kuwait’s first public Sukuk, the deal paved the way for Warba Bank and Ahli United Bank to issue their regulatory capital Sukuk. Accordingly, there was a significant amount of time spent with the relevant Shariah boards and scholars who were looking at this type of structure and instrument for the first time. Although Tier I issuances in the UAE and Qatar have used Mudarabah structures, this was the first time for Kuwait. This transaction was the first Sukuk transaction to have received formal approval from the Kuwait CMA pursuant to amendments made to the CMA’s bylaws which now require CMA approval for capital markets issuances for Kuwaiti entities (even when the issuer is an offshore SPV). In addition, approval was obtained from the CMA to offer and market the Sukuk in Kuwait.
Boubyan wins the Kuwait Deal of the Year for opening the Kuwaiti Islamic capital market under the CMA rules.
Honorable Mention: KNPC Clean Fuels and Equate
Qatar: Ezdan Sukuk Company (Ezdan Holding Group) |
|
Size: |
US$500 million issued under US$2 billion program |
Arrangers: |
Abu Dhabi Islamic Bank, Barwa Bank, Emirates NBD, HSBC Bank, Mashreqbank, Qatar First Bank and QInvest |
Bookrunners: |
Abu Dhabi Islamic Bank, Barwa Bank, Emirates NBD, HSBC Bank, Mashreqbank |
Lawyers: |
Linklaters and Al Tamimi & Company for the arrangers and Allen & Overy and Maples and Calder (Dubai) for the issuer |
Rating: |
‘Ba1’ by Moody’s and ‘BBB-’ by S&P |
Date: |
18th May 2016 |
Shariah advisors: |
The Shariah committees of HSBC Saudi Arabia and Mashreq Al Islami of Mashreqbank |
In 2016, Qatari banks were active with regulatory Sukuk issuances. In the past, the State of Qatar and its government-linked companies have issued. Ezdan Holding, however, is the first ever private sector Qatari corporate to issue Sukuk in the international capital markets.
The Ezdan deal is the first time that a hybrid real estate Wakalah (for no less than 51% of the underliers) and commodity Murabahah Sukuk paper has been issued in Qatar. The deal required counsel to address a number of novel local law issues in connection with the real estate assets. The Wakalah limb of the structure allows for the use of real estate-based assets that are in designated zones in Qatar where a usufruct interest in such real estate may be granted to a foreign entity. The initial issuance was composed of 70.7% Wakalah assets and 29.3% Tawarruq proceeds.
This is an important transaction in view of Ezdan’s profile in Qatar and the wider region. Ezdan is one of the Gulf region’s largest real estate companies with a market capitalization of approximately US$13.3 billion. Ezdan is also one of the largest companies listed on any Arabian stock market.
Honorable mention: Qatar Islamic Bank and BBG Sukuk (Barwa Bank)
Turkey: Yemeksepeti |
|
Size: |
EUR250 million (US$263.17 million) |
Buyer: |
Delivery Hero |
Lawyers: |
Hourani & Associates, Dentons and Bird & Bird (advised the sellers) for the arrangers and King & Spalding, legal counsel for Delivery Hero Holding (buyer) |
Date: |
Ongoing due to local law issues for cross-border acquisition |
Shariah advisor: |
none |
The Turkish market continues to be very promising. Nonetheless, the majority of 2016 deals are bank deals as well as a domestic currency deal for the Republic. Delivery Hero’s acquisition of Yemeksepeti is remarkable as it validates the opportunities in Turkey. With a major German applied technology group buying a Turkish peer, the deal is exciting on its own. But, this deal was structured as a Mudarabah. When two major groups that are not explicitly mandated to arrange their finances according to Shariah structures, one knows that Islamic finance is highly relevant.
Honorable mention: Hazine Müstesarligi Varlik Kiralama Anonim Sirketi (Republic of Turkey) and KT Kira Sertifikaları Varlık Kiralama
Bahrain: Kingdom of Bahrain |
|
Size: |
US$1 billion |
Arrangers: |
Arab Banking Corporation, BNP Paribas, Credit Suisse, JPMorgan Securities and Standard Chartered Bank |
Lawyer: |
Allen & Overy and Hassan Radhi & Associates for the arrangers and Norton Rose Fulbright and Zu’bi & Partners for the issuer |
Rating: |
‘BB’ (Stable outlook) by S&P and ‘BB+’ (Stable) by Fitch |
Date: |
4th October 2016 |
Shariah advisors: |
Shariah advisory committees of joint lead arrangers |
Not too long ago, one thought of Bahrain as almost exclusively a banking center. The Kingdom has been diversifying its economy. Over the past five years, no single industry accounts for more than 25% of real GDP. As a result, real estate and corporate finance deals featured among the nominees for Deals of the Year. The Kingdom of Bahrain’s own Sukuk leads the pack as the Kingdom was able to achieve its key goals: affirmation of the government benchmark in the domestic market, diversification of funding sources, and a successful confirmation of the Kingdom’s acceptance in global capital markets through the issuance of 144A and Reg S tranches for the Irish Stock Exchange-listed securities. Bahrain continued to use the head-lease/sub-lease structure. But, like others, the issuance adds a Tawarruq feature. The underlying real estate assets are to be no less than 51% of the total Sukuk underliers. This structure paves the way for the Kingdom of Bahrain to more easily issue Sukuk in the future by minimizing the amount of real estate assets which are required for a Sukuk issuance.
Honorable mention: Diyar Al Muharraq and The Oil and Gas Holding Company
Africa: Yinson Production (West Africa), a subsidiary of Yinson Holdings |
|
Size: |
US$780 million |
Arrangers: |
CIMB Investment Bank, Maybank Kim Eng Securities, OCBC, United Overseas Bank, Standard Chartered Bank, Instesa Sanpaolo |
Lawyer: |
Clifford Chance for the obligor, Allen & Overy for arrangers |
Rating: |
Unrated |
Date: |
December 2016 |
The deal is a US$780 million commodity Murabahah financing for the refinancing of Yinson’s existing project financing arrangements for the acquisition, conversion and refurbishment of a floating production, storage and offloading unit as well as the chartering, installation and operation of the Vessel in the Offshore Cape Three Points block located in the Tano Basin approximately 60 kilometers off the western coast of Ghana. The deal brings key Asian players to the African market for the first time in a deal supporting the African subsidiary of a Malaysian corporate. The deal may be the largest vessel financing in Africa during 2016.
Honorable mention: Government of Senegal as beneficiary and Sonacos, and government of Mauritania
US: Panasonic Corporation of North America Head Office building acquisition |
|
Size: |
US$165 million |
Investors: |
|
Lawyer: |
|
Rating: |
The tenant is rated ‘A-’ by S&P |
Date: |
December 2016 |
Shariah advisors: |
Shariah Supervisory Committee of KFH Capital |
Significant flows of private capital left the GCC and ASEAN regions for the US and UK real estate. Most of the investors preferred anonymity. Morgan Lewis represented Gulf Finance House’s return to the US market with a US$55.5 million acquisition of an industrial property portfolio and Sidra Capital entered the US real estate market with the acquisition of Amerisource/Lash Group Headquarters with a purchase price of US$67 million. After a long silence, KFH Capital also re-entered the US market with the acquisition of Panasonic Corporation of North America. The leveraged US$165 million deal is a bondable lease of the 12-storey building. KFH Capital’s equity in the investment is 35%. The Panasonic building enjoys advanced technology and has been certified with Leadership in Energy and Environmental Design (LEED) Platinum Interiors as well as LEED Core and Shell. LEED is an independent certification and recognized as the standard in the US and Europe. Not only has KFH made a sound income-generating investment, but KFH has invested in a sustainable and environmentally sound manner.
Honorable mention: GFG CI-1 and Sidra Capital — Amerisource Building
DP World Crescent
Nearly 40 transactions were nominated for 2016’s Deal of the Year. Transactions like Boubyan, Togo, Jordan, and Al-Falaah all represented the opening of new Sukuk markets. Even if Jordan and Kuwait are established Islamic finance markets, Sukuk deals have lagged in both. Jordan now has a sovereign benchmark and ideas for the global Islamic capital market to consider. Boubyan gave proof of concept to Kuwait’s new capital market rules. The sovereign issuance for Togo and Al-Falaah’s maiden Sri Lankan Sukuk expanded the Islamic capital market into new domains.
Dzahab, Ziya, Axiom, Barwani and Jeddah Economic City are bringing new concepts into an established market. Dzahab and Ziya provide examples of how to use the capital markets to manage corporate balance sheets in the financing industry. Barwani demonstrates the capacity of Oman’s CMA rules to accommodate innovation and new thinking. And, Jeddah Economic City breaks away from the overuse of Tawarruq in Saudi Arabia.
Malaysia’s Sime Darby brought two landmark deals to bear. In a deleveraging exercise, the diversified corporation issued perpetual Sukuk and new shares. Sime Darby also entered the renewable and sustainable energy field.
Yinson, Thar Block II and Cagamas all provided worthy examples of cross-border collaboration: Yinson taking Malaysian capital to Africa; Thar achieving cooperation between China’s lenders who lack Islamic finance experience and Pakistan’s seasoned Islamic financiers; Cagamas showed the capacity of Malaysia and Singapore to collaborate in a deal that demonstrated the role of Singapore’s global financial center.
In 2016, DP World Crescent showed a bit of each as the flagship business of the Emirate of Dubai returned to market.
DEAL OF THE YEAR: DP World Crescent |
|
Size: |
US$1.2 billion under US$3 billion program |
Arrangers: |
Citigroup Global Markets, Deutsche Bank (London branch), Dubai Islamic Bank, Emirates NBD, First Gulf Bank, HSBC Bank, Barclays Bank (appointed as dealers for the day), JPMorgan Securities (appointed as dealers for the day), National Bank of Abu Dhabi (appointed as dealers for the day), and Société Générale (appointed as dealers for the day) |
Bookrunners: |
Barclays Bank, Citigroup Global Markets, Deutsche Bank (London branch), Dubai Islamic Bank, Emirates NBD Capital, First Gulf Bank, HSBC Bank, JP Morgan Securities, National Bank of Abu Dhabi and Société Générale |
Lawyers: |
Linklaters for the arrangers and Clifford Chance with Conyers Dill & Pearman for the issuer |
Ratings: |
‘Baa3’ by Moody’s and ‘BBB-’ by Fitch |
Guarantor: |
DP World as obligor |
Date: |
31st May 2016 |
Shariah advisors: |
The Shariah committees of Citi Islamic Investment Bank, HSBC Saudi Arabia, Dubai Islamic Bank and Dar Al Sharia, and First Gulf Bank |
In the consensus deal of the year, DP World returned to market with an innovative deal. One of the largest container terminal operators, DP World has unrivaled capacity and throughput throughout the world. This transaction relies upon that capacity to back its Sukuk Wakalah.
This innovation is based on the first ever use of TEUs (twenty-foot equivalent units) as the underlying assets. TEUs are an industry measure of capacity. The TEUs are represented by vouchers allocated to the SPV for capacity comprised of loading, off-loading, storing and delivering containers at various terminals owned or operated by the company in the UAE. The Sukuk structure ties neatly into the company’s operating model without tying up physical assets in a transfer to the SPV or by their pledge as collateral. The Sukuk represents the latest in an evolving line of structures based on capacity rather than tangible assets. During 2016, we all shared great anxieties about the economic and political issues embroiling the MENA region. At the same time, global trade has stalled yet again. Nonetheless, DP World’s return to the global market after a nine-year hiatus was welcomed globally.
The Sukuk were issued in 144A and Reg S formats. The deal was oversubscribed 1.75 times with a final orderbook of US$2.1 billion. Investors represented 154 accounts from the UAE (47%), other MENA (17%), UK (14%), Switzerland (7%), other Europe (6%), Asia (5%), and the US (3%).
DP World’s Sukuk were part of a broader corporate finance exercise. The Sukuk were issued on the back of a highly successful tender offer on DP World’s outstanding US$1.5 billion 2017 Sukuk certificates. The Sukuk helped to optimize the obligor’s funding through the tender and new issue process. DP World has been able to build a liquid curve to better reflect the strength of their credit.
DP World’s deal achieved many milestones including: the second-largest GCC Sukuk transaction in 2015-16; the largest GCC corporate Sukuk tranche since 2014; the largest CEEMEA corporate international debt issuance over the past 12 months; and the largest non-SSA Sukuk issuance out of CEEMEA since 2015.