IJARAH: NAD AL SHEBA VILLAS (AN SPV OWNED BY NAKHEEL) | |
Size: | AED500 million (US$408.33 million) Ijarah 1 and AED1 billion (US$272.22 million) Ijarah 2 |
Arrangers: | Abu Dhabi Islamic Bank and SAMBA |
Legal counsel: | Clifford Chance for the obligor and White & Case for the arrangers |
Guarantor: | Nakheel |
Rating: | Unrated |
Shariah advisors: | Abu Dhabi Islamic Bank (ADIB) |
CIMB acted as a lead underwriter for Perusahaan Listrik Negara)’s first issuance from its third shelf registration program of IDR20 trillion (US$1.42 billion), which included IDR4 trillion (US$283.58 million) for Sukuk Ijarah. The proceeds are invested in power plant projects.
The Sultanate of Oman returned to the market with an Ijarah deal. This Standard Chartered-led deal was a modest departure from the previous diminishing Musharakah deals for the Sultanate. This demonstrates increased flexibility of the Sultanate in the management of its property needs for Sukuk issuances. ADIB led a complex transaction to facilitate the ongoing Nakheel project at Nad Sheba in Deira. The first leg of the deal is an ADIB bridge Ijarah to be taken out by an ADIB and SAMBA club. The bridge of AED500 million (US$136.11 million) allows Nakheel to complete the construction of 1,000 build-to-lease villas. Upon the completion of the villas, SAMBA will fund the AED500 million and the bridge extended by the ADIB will be converted into a 50% participation in phase 2. This structure was adopted as SAMBA does not finance under-construction build-to-let properties. The structure faced Shariah challenges because the tenor of Ijara 1 is shorter than the threshold of 12 months. This was solved by defining a 12-month tenor for Ijara 1 in the documents and balanced out by a mandatory prepayment clause where Nakheel has to repay the bridge within 100 days if a minimum of 500 villas are not completed. The structuring solution allowed ADIB and SAMBA to manage their unique corporate styles and facilitate Nakheel’s project. Honorable mention: Perusahaan Listrik Negara and Oman Sovereign Sukuk. |
MUDARABAH: YINSON TMC | |
Size: | RM950 million (US$231.65 million) |
Arrangers: | Maybank Investment Bank and AmInvestment Bank |
Lawyers: | Wong & Partners (member Baker McKenzie) for the arrangers |
Rating: | Unrated |
Date closed: | 8th May 2018 |
Shariah advisors: | AmBank Islamic and Maybank Islamic |
The 2018 Mudarabah offerings were largely bank capital deals. Albaraka Turk Katilim Bankasi (as the obligor) (Albaraka Turk); Bereket One (as the trustee and Rab Al Maal) came to market as did Dubai Islamic Bank Pakistan. Yinson came with one of the first Malaysia corporate deals.
Yinson is the sixth-largest floating production storage and offloading vessel independent leasing companies in the world. YHB Group is an international integrated offshore oil and gas production and support services provider which specializes in front-end engineering design, engineering, procurement, construction and installation, conversion and leasing of offshore oil and gas production and storage units. Established in 2014, YTMC is a wholly-owned subsidiary of YHB and is a treasury management center for members of YHB and its subsidiaries. “YHB, through its wholly-owned subsidiary, Yinson TMC – a treasury management center had issued a landmark perpetual Sukuk to fund the group’s future working capital requirements including the purchase and conversion of new floating production storage and offloading vessels. This is the first Mudarabah perpetual Sukuk for non-financial institutions category and the program is also the first-of-its-kind as it allows the issuer to issue senior and/or subordinated ranking perpetual Sukuk at the issuer’s discretion. The unique structure allows Yinson TMC to issue hybrid Sukuk with properties of both debt and equity, giving it access to cost-effective ringgit funding that is non-dilutive, compared with the traditional equity instruments,” explained AmInvestment Bank. Breaking the market norm of Malaysian perpetual Sukuk, the Yinson Sukuk are Mudarabah. This landmark transaction represents the first-ever issuance of a perpetual Sukuk facility by an oil and gas company in Malaysia, setting a new benchmark and case study for other market players to explore the perpetual Sukuk market. Honorable mention: ADIB Capital Invest 2, Albaraka Turk and Dubai Islamic Bank Pakistan |
MUSHARAKAH: UMW HOLDINGS (UMW) | |
Size: | RM1.1 billion (US$268.22 million) |
Arrangers: | CIMB Investment Bank and Maybank Investment Bank |
Legal counsel: | Zaid Ibrahim & Co for the arrangers and Albar & Partners for the issuer |
Date: | 20th April 2018 |
Shariah advisors: | CIMB Islamic Bank and Maybank Islamic |
Dubai Islamic Bank funded the construction of Souq Extra’s boutique mall. The Islamic Corporation for the Development of the Private Sector funded the Meghna Sugar Refinery in Bangladesh using diminishing Musharakah. Slowly, the applications of Musharakah are expanding into new solutions for construction, real estate and operations.
A unique approach was the structuring of perpetual Musharakah notes for UMW Holdings. Malaysia’s largest automotive group secured a 50% equity credit from RAM and maintained its existing ‘AA2’ senior rating. The notes also get 100% equity treatment for accounting purposes. The transaction allows UMW to deleverage, protect its positive credit rating and strengthen its capital for the coming years. Up until now, most global perpetual transactions have been Wakalah or Mudarabah. Apart from government-linked Malaysian Airlines’s perpetual Musharakah, this private sector Musharakah perpetual expands the ways that bankers, obligors and investors may contemplate perpetual instruments. Honorable mention: Souq Extra and Meghna Sugar Refinery. |
COMMODITY MURABAHAH/TAWARRUQ:
AL-ETISALAT AL-MUTANAKILAH AL-SAUDIA COMPANY (ZAIN) |
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Size: | US$1.7 billion executed in US$ and SAR |
Arrangers: | Al Rajhi Bank, Banque Saudi Fransi, Arab National Bank and Credit Agricole CIB |
Lawyers: | Latham & Watkins for the arrangers |
Rating: | Unrated |
Date closed: | Amended and restated 9th April 2018 |
Shariah advisors: | Not stated |
Tawarruq was hotly contested with many corporate finance and real estate deals. The benefit of Tawarruq is the ease of execution.
The tool allows for easily structured, secured deals such as the US$700 million deal for the Ministry of Finance on behalf of the government of the Islamic Republic of Pakistan. Al Dzahab Assets returned with a collateralized securitization for Malaysian cooperatives. Credit Agricole Corporate and Investment Bank was the lead arranger for a dual tranche deal for Zain’s Saudi Arabian operations. The transaction stands out as it is pairs a funded Tawarruq with what might be the largest profit rate swap for 2018. The profit rate swap was executed after closing. The structure is based on a series of promises to enter Tawarruq in the future. This allowed the swap to be novated to the Islamic banks which were part of the financing group. Honorable mention: Government of Pakistan and Al Dzahab Assets |
PROJECT & INFRASTRUCTURE FINANCE:
PROJECT SPV: ÇANAKKALE OTOYOL VE KOPRUSU INSAAT YATIRIM VE IŞLETME |
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Size: | EUR200 million (US$229.37 million) |
Arrangers: | ING Bank and ICBC Standard Bank |
Financiers: | ING Bank (a branch of ING-DiBa), Kuwait Finance House, Kuwait Turkish Participation Bank (Bahrain branch) |
Insurer: | ICIEC |
Legal counsel: | Shearman & Sterling (London) for the obligor and Clifford Chance for the banks |
Guarantor: | Republic of Turkey acting through the Prime Ministry, Undersecretariat of Treasury (Turkiye Cumhuriyeti Basbakanlik Hazine Mustesarligi) |
Rating: | None |
Shariah advisors: | Kuwait Finance House Shariah team/ICIEC Shariah team |
CIMB and Maybank arranged a RM5 billion (US$1.22 billion) Sukuk Wakalah facility for Edra Energy. This deal financed the largest combined cycle gas turbine plant in Malaysia. Dubai Islamic Bank Pakistan syndicated a PKR1.2 billion (US$8.57 million) (inclusive of a greenshoe option of PKR100 million (US$714,066)) to build the Tufail Chemical Industries new hydrogen peroxide plant.
The Canakkale 1915 Bridge and Highway project is the first motorway project in Turkey to use direct Islamic financing. Clifford Chance advised 24 lenders from 10 countries on the EUR3.2 billion (US$3.67 billion) project financing, including Islamic finance institutions, the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC), export credit agencies, international banks and Turkish banks in relation to the construction of the longest suspension bridge in the world in northwest Turkey. “Clifford Chance are delighted to be recognized for some of our leading Islamic finance transactions in 2018. This past year saw us acting on several first-of-a-kind deals, with the world’s debut sovereign green Sukuk in Indonesia, to the first Sukuk issuance in Morocco. It has been an exciting year and we are honored to be recognized across 10 categories, covering multiple jurisdictions, at this year’s IFN Awards. This is a great testament to the depth of our global practice and our integrated teams across the network,” said the firm. Kuwait Finance House and its subsidiary Kuveyt Turk led a EUR200 million (US$229.37 million) tranche. The ICIEC’s guarantee brought the Islamic financing component to EUR300 million (US$344.05 million). “Kuveyt Turk is proud being one of the leading banks and sole Islamic financier in the Çanakkale 1915 Bridge Project. Kuveyt Turk, together with KFH as a group, provided EUR200 million, covering 8.8% of total financing. The project is unique as it has an Islamic tranche in a PPP financing and it is the first example of an Istisnah structure in Turkey,” the bank told IFN. The complex public-private partnership (PPP) deal for the 1915 Canakkale bridge included numerous financing tranches all under a common terms agreement and with complex inter-creditor arrangements. The Islamic structuring was complex due to the nature of the project and also the nature of government support arrangements, all of which had to be factored into the Turkish legal system. This was the first Islamic PPP financing in Turkey and also the first ICIEC wrapped infrastructure financing in Turkey. Honorable mention: Edra Energy and Tufail Chemical Industries |
Shortlisted for DOTY 2018 | |
REAL ESTATE: SAUDI REAL ESTATE REFINANCE COMPANY | |
Size: | SAR250 million (US$66.62 million) |
Arranger: | HSBC Saudi Arabia |
Legal counsel: | Allen & Overy and Khoshaim & Associates for the arranger |
Rating: | Unrated |
Date: | 6th December 2018 |
Shariah advisors: | Dar Al Shariah |
Saudi Arabia was a surprisingly active real estate market. Alkhabeer Capital launched its REIT; NCB Capital expanded its AlAhli REIT Fund (1)’s holdings; and Dar Al Arkan issued Sukuk. The UAE and Malaysia were also very active. Turkey’s Emlak Konut Real Estate Investment Company issued Sukuk Wakalah in order to expand liquidity for its domestic real estate in one of the largest domestic issuances ever.
Market development is a key factor and in 2018, the focus on solving the housing needs for Saudi Arabians brought forth the first Sukuk program to refinance bank investments in home finance plans. HSBC Saudi Arabia established an SAR11 billion (US$2.93 billion) domestic Sukuk issuance program for Saudi Real Estate Refinance Company (SRC) and on the debut issuances of the SAR150 million (US$39.97 million) Sukuk due 2023, SAR50 million (US$13.32 million) due 2025 and SAR50 million due 2028. The Sukuk and transaction documents are governed by Saudi Arabian law and may be offered in Saudi Arabia by way of private placement (either as a limited offer or as an offer to sophisticated investors). The issuances represent the capital markets debut of SRC which was established in 2017 with the objectives of increasing home ownership among Saudi citizens and promoting the development of the housing finance market in the Kingdom. The proceeds from the issuances will be used by SRC to support its principal business activities, being (i) the acquisition of portfolios of home finance contracts from Saudi banks and financing companies, allowing these companies to free up their balance sheet capacity and (ii) providing short-term financing to Saudi banks and financing companies, enabling such entities to offer customers further home financing. The program incorporates Mudarabah and Murabahah structures, giving SRC the flexibility to either use the ‘classic’ structure, with multiple Murabahah transactions covering both the principal amount of the Sukuk and all profit payments or an ‘enhanced’ structure, where the payment of principal is covered by a single Murabahah transaction and profit payments are made using income from the Mudarabah. Honorable mention: Alkhabeer REIT and Emlak Konut Real Estate Investment Company |
Shortlisted for DOTY 2018 | |
SOVEREIGN: REPUBLIC OF INDONESIA (THROUGH PERUSAHAAN PENERBIT SBSN INDONESIA III) | |
Size: | US$1.25 billion |
Arrangers and bookrunners: | Abu Dhabi Islamic Bank, CIMB Investment Bank, Citigroup Global Markets, Dubai Islamic Bank and HSBC |
Co-arrangers: | Bahana Sekuritas, Danareksa Sekuritas and Trimegah Sekuritas Indonesia |
Lawyers: | For the issuer: Clifford Chance and Assegaf Hamzah & Partners and for the arrangers: Norton Rose Fulbright (Asia) and AZP Legal Consultants |
Rating: | Issuer and obligor rating: ‘Baa3’ (Moody’s Investors Service)/ ‘BBB-’ (S&P)/‘BBB’ (Fitch Ratings) |
Date closed: | 1st March 2018 |
Shariah advisors: | Abu Dhabi Islamic Bank, CIMB Islamic Bank, the Shariah advisory board of Citi Islamic Investment Bank, the executive committee of the Fatwa and the Sharia supervisory board of Dubai Islamic Bank and the executive Shariah committee of HSBC Saudi Arabia |
Oman, Saudi Arabia, Bahrain and Malaysia (Danainfra) returned to the market in 2018. In addition, various government agencies in Africa as well as the Maldives all engaged in trade finance transactions. Most transactions nominated represent second issuances under programs or returns to the market using similar tools as in previous years. Indonesia, however, issued the world’s first-ever sovereign green Sukuk issuance. The Wakalah transaction is the first-ever issuance under the Republic’s newly established Green Bond and Green Sukuk Framework The proceeds will be used exclusively to finance or refinance expenditure directly related to ‘Eligible Green Projects’ as defined in the Green Bond and Green Sukuk Framework of the Republic of Indonesia adopted in January 2018. The use of proceeds may be utilized exclusively for spending in the form of budget allocation, subsidies or project funding of eligible green projects that include a broad range of sectors which promote the transition to a low-emission economy and climate resilient growth, including mitigation, adaption and biodiversity.
“This was a pioneering deal, not only for Asia, but globally, and we are delighted to have been a part of it. The deal enabled us to bring together our debt capital markets, Islamic finance and green bond experience, which was delivered seamlessly by our cross–jurisdictional team,” said Gregory Man, a partner at Norton Rose Fulbright. Honorable mention: Oman and Danainfra |
STRUCTURED FINANCE: SHAHEEN SPV’S 12-YEAR REPACKAGING SUKUK | |
Size: | Undisclosed |
Arrangers: | Natixis, Noor Bank and Warba Bank |
Bookrunners: | Natixis and Noor Bank |
Lawyers: | Clifford Chance for the arrangers |
Rating: | None |
Date closed: | 13th June 2018 |
Shariah advisors: | Internal Shariah committees of Natixis and Noor Bank |
As part of Malaysia Building Society (MBSB)’s acquisition of Asian Finance Bank, there was a unique transfer of debt that allowed MBSB to exchange its outstanding covered Sukuk with a new covered Sukuk that allowed the transfer of MBSB’s Shariah compliant assets to the re-named MBSB Bank’s balance sheet.
Credit Agricole led the Zain corporate financing with a novated profit rate swap. Natixis and Noor Bank executed a US$95 million repackaging Sukuk. The issuance, which is the first of its kind, repackages Shariah compliant facilities originally made available to finance the delivery of five new aircraft to Middle East-based international airline operators. The issuance proceeds are used to acquire part of the mezzanine and subordinated Shariah compliant facilities. Investors are exposed to the performance of the underlying airline operators. The SPV set up to issue the Sukuk is based in the Abu Dhabi Global Market (ADGM). This transaction is the first time that an ADGM-based SPV has been used to issue Sukuk. Honorable mention: MBSB and Al-Etisalat Al-Mutanakilah Al-Saudia Company (Zain). |
TRADE FINANCE: ASIA ALLIANCE BANK (UZBEKISTAN) | |
Size: | US$9 million |
Financier: | International Islamic Trade Finance Corporation (ITFC) and IDB |
Lawyers: | In-house |
Guarantor: | Asia Alliance Bank |
Trustee: | Asia Alliance Bank |
Rating: | Unrated |
Date closed: | 7th June 2018 |
Shariah advisors: | IFTC |
The ITFC continues to raise the banner of trade finance and open new markets. Among the important ITFC deals in 2018 were a Murabahah import line for the State Agency of Material Reserves (Tajikistan) and a similar program for the Republic of Togo. Each of these represents an important step in opening these markets to Islamic finance.
The ITFC also initiated a US$100 million trade finance framework agreement with the Republic of Uzbekistan. The first bank to access the program is Asia Alliance Bank. In its deal with Asia Alliance Bank of Uzbekistan, the ITFC added an innovative feature. The process allows the ITFC to support SMEs without being involved in the cumbersome approval process and it serves as an alternative to either commodity Murabahah or two-step Murabahah for financing SMEs. A further issue in Uzbekistan is that current regulations do not allow conventional banks to be involved in trading activities and there is no Islamic bank. The ITFC’s tailored solution is a line of trade finance using Wakalah and guarantee structures. Asia Alliance Bank as a Wakil of the ITFC finds clients, assesses them, conducts credit checks, legal checks and signs Murabahah contracts with SMEs on behalf of the ITFC. Once the Murabahah is signed, the bank’s role ends as a Wakil. Afterwards, Asia Alliance bank issues a guarantee just before the ITFC disburses the funds directly to the respective suppliers of commodities/goods. The was the second Uzbek deal, the other having been led by the Islamic Corporation for the Development of the Private Sector. The ITFC deal helps to grow a new market with no Islamic banking/finance law. The successful implementation of the deal has paved the way for seven more conventional banks from Uzbekistan to approach the ITFC with requests to conclude similar Islamic trade finance deals with them. The same structure will be used to serve banks in Tajikistan and the Kyrgyz Republic. The overall financing extended to SMEs using this product is expected to reach US$80 million by the end of 2019. Through its line of finance to conventional banks, the ITFC is sensitizing them to Islamic finance and teaching their staff how to conduct Shariah compliant transactions. Some banks are now interested to open an Islamic window, once the current legislation is adjusted. Honorable mention: State Agency of Material Reserves (Tajikistan) and the Republic of Togo with the National Electricity Company as executing agent |
Shortlisted for DOTY 2018 | |
SUKUK: TOLKIEN FUNDING SUKUK NO.1 | |
Size: | GBP250 million (US$321.38 million) |
Arrangers: | Standard Chartered Bank and Al Rayan Bank |
Lawyers: | Norton Rose Fulbright for arranger and seller and Clifford Chance for Standard Chartered Bank |
Rating: | ‘AAA’ by S&P and ‘Aaa’ by Moody’s Investors Service |
Date closed: | February 2018 |
Shariah advisors: | Al Rayan Bank |
Nile Delta Sukuk represented the end of the current Dana Gas saga. The transaction allowed for the restating of Dana Gas’s obligations to its existing Sukukholders. One hopes that the terms and conditions are finally palatable for all parties.
Kuveyt Turk completed the first corporate Sukuk issuance of TRY125 million (US$22.77 million) for a maturity of 176 days where Superonline, the largest fiber internet provider, acted as the fund user and obligor. The funds collected from investors by KT Sukuk Varlik Kiralama were transferred to Superonline through the investment agency or Wakalah and the revenues derived from the fiber internet packages were distributed to the certificate holders. Al Rayan Bank issued a Wakalah residential mortgage-backed securitization Sukuk facility which represented a true securitization of home purchase plans. As a result, they are full pass-through certificates and bear the risk of non-performance of the underlying plans. This year, Al Rayan Bank, the UK’s largest Islamic bank, became the first bank in the world to issue a public Sukuk facility in a non-Muslim country. This transaction reinforced the UK’s position as the western hub for Islamic finance. “The Tolkien Sukuk involved the innovative use of securitization techniques, while delivering a structure that is recognizably a UK RMBS transaction. The transaction required us to pull together multi-disciplinary team from across the global firm, and this award is testament to the hard work across London, Dubai and the US,” according to Gregory Man, a partner at Norton Rose Fulbright. Al Rayan Bank’s Shariah compliant Tolkein Sukuk is the largest-ever GBP-denominated Sukuk issued by a UK entity, following the UK government’s GBP200 million (US$257.11 million) Sukuk issued in 2014. Honorable mention: Nile Delta and Superonline Iletisim Hizmetleri (100% subsidiary of Turkcell Group) |
SYNDICATED: PESTECH (CAMBODIA) | |
Size: | US$53 million |
Arrangers: | OCBC Al-Amin Bank and CIMB Bank |
Lawyers: | Wong & Partners (Malaysia) and Bun & Associates (Cambodia) for the banks |
Rating: | Unrated |
Date closed: | June 2018 |
Shariah advisors: | Not stated |
National Industries Group Holding of Kuwait (NIG) returned to the market in 2018 with a KWD76 million (US$250.21 million) syndicated Tawarruq and a KWD10 million (US$32.92 million) Sukuk facility. Arranged by Warba Bank, the deal allowed NIG to refinance existing obligations with flexibility while also supporting the Capital Markets Authority’s Sukuk regulations with a new corporate issuance.
The government of Pakistan’s World Bank-guaranteed US$700 million facility brings the World Bank Group deeper into the Islamic financial markets. Arranged by Standard Chartered, the deal is part of the series of financings bolstering Pakistan during these difficult financial times. In Cambodia, OCBC Al-Amin Bank and CIMB Bank raised US$53 million for Malaysia’s Pestech, a BOT power operator. The financing facilities were utilized for the funding of the design, engineering, construction, manufacturing, installation, completion, testing and commissioning of the 220 km double circuit transmission line from the 230 kV Stung Tatay hydropower plant to Phnom Penh, Cambodia. The project financing is the first known Islamic financing for Cambodia. In addition, the transaction has a positive social impact, by helping to expand rural electrification in Cambodia and reducing reliance on imported energy. Honorable mention: National Industries Group Holding of Kuwait and government of Pakistan |
Shortlisted for DOTY 2018 | |
RESTRUCTURING: NILE DELTA SUKUK (ISSUER AND TRUSTEE)/DANA GAS (OBLIGOR) | |
Size: | US$530 million |
Lawyers: | Latham & Watkins (lead counsel to Dana Gas); Al Tamimi & Company (UAE, Egypt and Bahrain local counsel to Dana Gas); Maples and Calder (Dubai) (British Virgin Islands (BVI) local counsel to Dana Gas and Cayman Islands local counsel to the new trustee) and Lex Caribbean (Barbados local counsel to Dana Gas); and Weil, Gotshal & Manges (counsel to the ad hoc committee); Allen & Overy (counsel to the delegate); and Fieldfisher (counsel to the existing trustee) |
Date closed: | 13th August 2018 |
Shariah advisors: | Dar Al Sharia Legal & Financial Consultancy |
Most of the 2018 submissions in the Restructuring category were from entities like Dar Al Arkan, SAJ Capital and Tilal Development. Each of these deals was the reorganization of the existing debts of a non-stressed obligor. Each had a structure or credit story to address.
But nothing had the turbulence and controversy that accompanied Dana Gas. In 2017, the company initiated a standoff with creditors. Among the company’s efforts to avoid payment of its maturing Sukuk was an assertion that its existing Sukuk were not Shariah compliant. One may easily rehash the merits or intentions of Dana Gas’s positioning. With two series of Sukuk maturing in 2017, the company appeared to be disavowing any duty to honor the US$425.04 million 7% exchangeable trust certificates due 2017 and US$425.04 million 9% ordinary trust certificates due 2017. By August 2018, the company was able to agree to a partial cash tender and issuance of US$530.41 million certificates due 2020 by Nile Delta Sukuk. The Sukuk are issued in both Reg S and 144A certificates. This process brought an end to the various litigations in England, Sharjah and the BVI. The entire brouhaha came up in 2017 when Dana Gas asserted that its Sukuk Mudarabah were not truly Mudarabah. The replacement Sukuk addressed this issue by taking the form of Sukuk Ijarah. One can only hope that these will not be found defective in the future. As a result of the tender offer and exchange of the existing certificates for the new certificates pursuant to the consent solicitation, Dana Gas was able to bring to an end the uncertainty and the litigation proceedings in the UK, Sharjah and the BVI (it being an express condition to the deal that all parties to effect a withdrawal of such litigation). Honorable mention: Dar Al Arkan, SAJ Capital and Tilal Development |
HYBRIDS: GENERAL HOLDING CORPORATION (SENAAT) | |
Size: | US$300 million issuance under US$3 billion program |
Arrangers and bookrunners: | Abu Dhabi Islamic Bank, Citigroup Global Market, Dubai Islamic Bank, First Abu Dhabi Bank, Standard Chartered Bank |
Lawyers: | Allen & Overy for the issuer and Clifford Chance for the arrangers |
Rating: | ‘A3’ (Moody’s Investors Service)/ ‘A’ (Fitch Ratings) |
Date closed: | 5th December 2018 |
Shariah advisors: | Executive committee of the Fatwa and Shariah supervisory board of Abu Dhabi Islamic Bank, the Shariah supervisory board of Citi Islamic Investment Bank, the executive committee of the Shariah board of Dubai Islamic Bank and Dar Al Sharia, Shariah supervisory board of First Abu Dhabi Bank and Shariah supervisory committee of Standard Chartered Bank |
Hybrid deals have trended toward either a Wakalah or Mudarabah investing in a pool of assets along with a Tawarruq arrangement. The 2018 KSA Sukuk issuance exemplified this trend as the Kingdom of Saudi Arabia returned successfully to the Islamic debt capital markets. The other common alternative is the classical Istisnah-Ijarah model demonstrated in the Al-Munawwarah (Autoriti Monetari Brunei Darussalam) issuance. Senaat’s debut issuance was a hybrid Sukuk Wakalah combining Ijarah and Tawarruq The Ijarah leg is ‘asset light’ with the underlying assets being plant and machinery assets representing 34% of the issuance price. The commodity Murabahah leg accounts for the balance of 66% of the issuance price. The transaction was also the first to be dual listed on the Abu Dhabi Securities Market and the London Stock Exchange.
Honorable mention: KSA Sukuk and Al-Munawwarah (Autoriti Monetari Brunei Darussalam) |
REGULATORY: ADIB CAPITAL INVEST 2 | |
Mudarib: | Abu Dhabi Islamic Bank |
Size: | US$750 million |
Joint lead managers: | ADIB Capital, Citi, ENBD, First Abu Dhabi Bank, HSBC, JPMorgan, Sharjah Islamic Bank and Standard Chartered Bank |
Lawyers: | Linklaters for the issuer and Allen & Overy for the arrangers |
Rating: | ‘A2’/‘A+’ by Moody’s Investors Service/Fitch Ratings |
Date closed: | 23rd May 2018 |
Shariah advisors: | Executive committee of the Fatwa and Shariah supervisory board of ADIB, Shariah advisory board of Citi Islamic Investment Bank, Fatwa and Shariah supervisory board of First Abu Dhabi Bank, central Shariah committee of HSBC Bank Middle East, JPMorgan Shariah supervisory committee and Shariah supervisory committee of Standard Chartered Bank |
Arguably, Malaysia Building Society (MBSB)’s debt exchange fits within the parameters of regulatory capital. But it is distinct in that it brings the assets and liabilities of the merged banks into compliance with Bank Negara Malaysia’s requirements for the transfer of Islamic assets into the acquired bank while establishing a funding source.
Dubai Islamic Bank Pakistan closed the year with a PKR3.3 billion (US$23.56 million) additional Tier 1 (AT1) issuance. The transaction was the bank’s first AT1 Sukuk issuance and included a PKR300 million (US$2.14 million) greenshoe option. ADIB became the first UAE issuer to raise AT1 Sukuk under the Central Bank of the UAE’s new Basel III regulations. The transaction was the largest regulatory capital deal in the MENA region in 2018. The deal also revived the market for AT1 and T2 offerings from UAE banks, as the market had been on hold while the Basel III capital standards were being finalized by the central bank during 2017. The issuance supports ADIB’s objective to build and maintain comfortable capital. The use of proceeds will go toward the first refinancing for an outstanding GCC T1 instrument (issued in 2012) with a new AT1 instrument. Beyond the Sukuk, ADIB also raised AED1 billion (US$272.22 million) in a rights issuance. A unique feature of the transaction is that the Mudarabah is governed by English law. Honorable mention: MBSB and Dubai Islamic Bank Pakistan |