Oman: Deal of the Year
Mohammed Al Barwani Holding (MB Holding) recently revitalized the Omani corporate Sukuk space, after three years of hiatus, with a US$76 million Sukuk Wakalah facility, becoming the second corporate to issue Sukuk and interestingly, the first to tap the domestic Islamic debt market pursuant to the newly-issued Sukuk regulation. NURUL ABD HALIM explores the workings of this exciting deal.
The facility was engineered using the Wakalah structure given the nature of assets tied to MB Holding (the obligor) that were available for the transaction. According to the prospectus, assets under the Wakalah portfolio include real estate units used by MB Holding, externally-leased real estate assets and certain Shariah compliant shares which meet specified eligibility criteria.
Proceeds raised from the Sukuk will be used by the issuer to settle certain outstanding financing arrangements, support MB Holding’s subsidiaries’ capital expenditure commitments and cash requirements, and also for the multinational conglomerate’s other corporate purposes.
Summary of terms & conditions |
|
Issuer |
Mohammed Al Barwani Sukuk Issue |
Obligor |
|
Size of issue |
US$76 million |
Mode of issue |
Private placement |
Purpose |
To settle certain outstanding financing arrangements, support certain MBH subsidiaries with regards to their capital expenditure commitments and cash requirements and for other corporate purposes |
Tenor |
Five years |
Issuance price |
100% of the aggregate face amount of the certificates |
Profit rate |
8.5% |
Payment |
Semi-annually |
Currency |
US dollars and Omani rial |
Maturity date |
29th June 2021 |
Lead managers and bookrunners |
|
Principal advisor(s) |
|
Governing law |
Omani law |
Legal advisor(s)/counsel |
Dentons & Co, Oman branch and Dentons & Co (to the issuer and MBH), Trowers & Hamlins (to the issue manager, joint placement agents, collecting bank and sole structuring advisor as to the laws of Oman) and Allen & Overy (to the joint placement agents and sole structuring advisor) |
Listing |
|
Shariah advisor(s) |
Shariah Supervisory Committee of Standard Chartered Bank and Amanie Shariah Supervisory Board |
Structure |
|
Tradability |
The certificates will be traded over-the-counter until MSM is able to accept US dollar-denominated instruments to be publicly traded |
Face value |
OMR100,000 (US$258,947) |
Issued by way of a private placement, the US dollar Shariah compliant certificates are part of the company’s US$150 million multicurrency Sukuk program and had been listed, together with the Omani rial tranche, on the Muscat Securities Market (MSM)’s Bonds and Sukuk Market effective upon the publication of its prospectus on the 29th June 2016. This is the first Islamic debt issuance, and the maiden Islamic financing, by MB Holding, and also the second corporate Sukuk issuance in the Sultanate.
Marking a significant milestone in Oman’s Islamic capital market, the five-year unrated dual-tranche certificates come on the heel of the newly-published Sukuk regulation, which seeks to spur further Sukuk issuances particularly from private sector players. While the new Sukuk law may be a boon for prospective issuers, it presented certain challenges in MB Holding’s case.
Denton & Co, one of the legal advisors of the Sukuk, told IFN that the introduction of the new Sukuk law took place during the course of this pioneering Sukuk transaction which required the documents to be reviewed and amended where necessary to ensure compliance with the new regulation.
Summary of terms & conditions |
|
Issuer |
Mohammed Al Barwani Sukuk Issue |
Obligor |
|
Size of issue |
US$76 million |
Mode of issue |
Private placement |
Purpose |
To settle certain outstanding financing arrangements, support certain MBH subsidiaries with regards to their capital expenditure commitments and cash requirements and for other corporate purposes |
Tenor |
Five years |
Issuance price |
100% of the aggregate face amount of the certificates |
Profit rate |
8.5% |
Payment |
Semi-annually |
Currency |
US dollars and Omani rial |
Maturity date |
29th June 2021 |
Lead managers and bookrunners |
|
Principal advisor(s) |
|
Governing law |
Omani law |
Legal advisor(s)/counsel |
Dentons & Co, Oman branch and Dentons & Co (to the issuer and MBH), Trowers & Hamlins (to the issue manager, joint placement agents, collecting bank and sole structuring advisor as to the laws of Oman) and Allen & Overy (to the joint placement agents and sole structuring advisor) |
Listing |
|
Shariah advisor(s) |
Shariah Supervisory Committee of Standard Chartered Bank and Amanie Shariah Supervisory Board |
Structure |
|
Tradability |
The certificates will be traded over-the-counter until MSM is able to accept US dollar-denominated instruments to be publicly traded |
Face value |
OMR100,000 (US$258,947) |
“Prompt analysis of the new regulation was undertaken, followed by a meeting with the Capital Market Authority to discuss the impact on the transaction,” said the law firm adding that the exchange’s inability to accept US dollar certificates on the market also presented another hiccup. “There was a further complication in that the MSM does not currently have the capability to enable US dollar-denominated certificates to be publicly traded. The certificates will be traded over-the-counter until MSM is able to accept US dollar-denominated instruments to be publicly traded.”
Established in 1982, MB Holding is a multinational corporation and one of the fastest growing and largest oilfield services companies in the Middle East with operations in over 15 countries. The main activities of subsidiary companies within MB Holding include drilling and oilfield services, exploration and production of oil and gas, marine and engineering services, mining and investments.
Web: www.dentons.com