The Thai government will issue a US$250 million dollar-denominated Sukuk by June to finance the construction of railway lines. The Sukuk will be issued in Malaysia and the GCC to garner investors from both places. Tuansaleena Kubaha, vice president of investment banking at the Islamic Bank of Thailand (IBT) said the IBT is the co-arranger and co-placement manager for the Sukuk, which will have a tenor of five to seven years. The parties involved in the deal, which were not named, are currently considering the pricing and structure of the Sukuk.
In response to Islamic Finance news, Tuansaleena cited the strength of the exchange rate as an attractive feature for issuing a foreign currency Sukuk. The potential of attracting global funds could also be a major contributing factor.
The announcement came as the Securities and Exchange Commission of Thailand reported the long awaited completion of new and amended regulations permitting domestic financial institutions to issue Sukuk. In addition to these rules, the finance ministry is also working on two sets of guidelines covering fair taxation of Islamic finance products and secondary trading of Sukuk by brokers.
The regulations, in addition to opening up the Sukuk market to local players, will place no restrictions on the type and structure of Sukuk to be issued. Law firm Allen & Overy in Bangkok, who were involved in the development of the new rules and guidelines, said any Sukuk structure is allowed as long as the respective Shariah boards approve it. In this respect, the Thai market may attract more players who are interested in issuing Sukuk.
Tuansaleena said, “The IBT is looking into the possibility of a domestic Thai baht-denominated Sukuk, but perhaps not within the next 12 months.” However, demand for the local currency Sukuk does exist and the corporate sector is expected to tap into this alternate source of funding. Tuansaleena added, “We may see one or two major corporate issuances by the end of this year,” as there are demands from investment funds and insurance operators for Shariah compliant securities.
Earlier this year, Thai corporate Trans Thai-Malaysia, a subsidiary of the Petroleum Authority of Thailand, became the first Thai issuer with a US$196 million Sukuk issued in Malaysia.