In December 2013 Vallianz Holdings Limited, an integrated offshore marine solutions provider listed on the Catalist board of the Singapore Exchange, and its wholly-owned Labuan subsidiary Vallianz Capital, established a US$500 million Islamic trust certificates (Sukuk) issuance program based on the Shariah principle of Wakalah Bi Al-Istithmar.
This program follows the successful establishment of, and first drawdown under, a trust certificates issuance program by its substantial shareholder, Swiber Holdings, in July 2013 and is evidence of the continuing momentum for the use of Islamic financing by Singapore companies.
The Vallianz group made its foray into the Middle Eastern market in 2013 through its acquisition of a 50% stake in Rawabi Offshore (the remaining 50% stake being held by Rawabi Holding, an established Saudi-based oilfield services provider), and revenue contributions from Middle Eastern operations are expected to contribute very significantly to the group”s overall revenue in 2014. The program allows Vallianz Holdings Limited to tap global investor interest in its Sukuk, including from the Middle Eastern investor base.
Proceeds from each issuance of Sukuk under the program are expected to be applied by the issuer towards a Wakalah venture comprising investments in offshore or shipping vessels and a commodity Murabahah investment, in a proportion which is compliant with Shariah. The use of vessels as underlying assets is a first for Sukuk issued out of the Singapore market, which have in the past typically witnessed the use of Shariah compliant real estate or shares.
Equally interesting are the built-in options for certain series of Sukuk issued under the program to benefit from a Kafalah guarantee (from Rawabi Holdings or other third parties) and/or certain security arrangements (including mortgages over the vessels forming part of the Wakalah venture). Credit enhancement features are unusual for Sukuk but the options for guarantees and security under this program could provide flexibility to increase the attractiveness of Vallianz Capital’s Sukuk to potential investors on a deal-by-deal basis.
The author was involved in this transaction as a legal adviser.
Yeo Wico is a partner at Allen & Gledhill. He can be contacted at