Shuaa Capital seeks to enter sukuk market

>by Asma Alsharif
Shuaa Capital plans to structure and sell the Islamic bond issues by Saudi firms after the launch last week of a bond market in the kingdom, the head of its Saudi unit said.

"We are working hard to be active players in this market," said Omar al-Jaroudi, the chief executive of Shuaa's Saudi affiliate.

"We are seeking mandates and going after those companies that require financing that do not wish to open their equity base but are willing to open bonds." he said.
Saudi Arabia launched on Saturday a new market for Islamic bonds, or sukuk, diversifying Saudi companies' financing options amid a global financial crisis that has caused banks to be more cautious towards lending.

"Not only there is demand for sukuk, not only there is an interest in sukuk issuance, but there is also support from regulators to support this market," said Jaroudi.

The governor of the Saudi central bank Muhammad al-Jasser said in February that commercial banks and firms seeking financing should tap into the debt market with bond issues.
Source : Reuters

Moody's-Dubai bond cld bode well for corp. ratings

DUBAI, Feb 23 (Reuters) - Moody's Investors Service said on Monday the Dubai's government's $20 billion bond programme could support debt ratings of six Dubai companies that were placed under review for a downgrade earlier this month.

Moody's said on Feb. 2 it was considering downgrading its debt ratings of six Dubai companies, including DP World (DPW.DI) and Emaar Properties EMAR.DU, due to the escalating global financial crisis.

On Sunday, Dubai said it had sold $10 billion in five-year unsecured bonds to the United Arab Emirates central bank, carrying a fixed interest rate of 4 percent per year.

If there are no restrictions on how Dubai uses bond proceeds this could support Moody's ratings of Emaar, DP World, DIFC Investments, Dubai Holding Commercial Operations Group, Dubai Electricity and Water Authority and the Jebel Ali Free Zone.

"Assuming that there are no such restrictions, this news is clearly supportive for the ratings of the six Dubai Inc. companies that are rated by Moody's," Moody's said in a statement.

"Our ongoing ratings review ... will consider to what degree the erosion of Dubai's intrinsic economic strength and the fundamental creditworthiness of each of the six ... is offset by the materialisation of financial support from the federal government."

Moody's had said it could lower its debt and Islamic bond, or sukuk, ratings for the six firms, all linked to the Dubai government, by as much as two notches each. The review is due to be completed "shortly", it said.

Citing a deterioration in the regional macroeconomic outlook, Moody's said Dubai had been hit harder than other economies in the oil-exporting Gulf region. Oil prices have slumped more than $100 a barrel since a peak last July.

Moody's current ratings for all of the Dubai companies except Emaar is A1. Its rating for Emaar is A3. (Reporting by Daliah Merzaban; Editing by Chris Pizzey)

Source : Reuters

GCC bond markets slide 62.4%

by Rebecca Bundhun

Conventional and Islamic bond (sukuk) markets decreased substantially in the GCC in 2008, but sukuk managed to grow its market share, a new report by the Kuwait Financial Centre (Markaz) has revealed.

The GCC aggregate bond market plummeted to $18.1 billion in 2008, down by 62.4 percent compared with the amount raised in 2007.

While volumes were down dramatically, the Markaz reports shows that the sukuk market share continued to grow last year to reach 45 percent of total the value issued by GCC bond markets, up from 40 percent in 2007.
The sukuk market raised $8.1 billion last year, while conventional bonds raised $9.98 billion, Markaz said.

Nearly 73 percent of this total value was issued in the first half of the year.

Corporate issuances made up a larger segment of the aggregate bond market than sovereign issuance, accounting for $9.6 billion and a market share of 53.4 percent.

The UAE had the majority share of the amount raised, with $8.8 billion or 49 percent of the total amount through 21 issues, Markaz said.

Standard & Poor’s on Wednesday issued a report stating that global sukuk issuance fell by more than 56 percent last year compared with 2007, to $14.9 billion, due to the global turmoil, but said that the long-term prospects for sukuk are good.

Indonesia is planning an Islamic bond, or sukuk, worth $1 billion

HONG KONG (Reuters) - The start of the year has seen a flurry of deals in Asia's debt and equity markets, and bankers expect similar bursts of activity throughout 2009 as sellers price their offerings attractively to tap pockets of demand.

In less than two weeks, big investors led by Bank of America (BAC.N) and Royal Bank of Scotland (RBS.L) managed to sell $5.7 billion worth of shares in two Chinese banks at discounts ranging from 7 to 12 percent to their last traded prices.

More such sales are expected as strapped investors look to raise cash but much will depend on volatile stock markets.

On the debt side, Export-Import Bank of Korea (KEXIM) this week sold a $2 billion bond that drew $4.4 billion in orders. That followed a $1.5 billion sovereign bond issue by the Philippines that was priced to sell and drew even greater demand.

With plenty of supply coming to market, buyers have the upper hand on pricing. As this week's selldown in stocks shows, demand can be fleeting.

"There are significant refinancing requirements in 2009 and this will generate plenty of transaction flow. Investors are willing to invest but as we have seen on some of the recent block trades, discounts are still wide," said Ken Poon, head of capital markets origination for Citigroup in Asia-Pacific.

"Whenever there is stability in the market you will see activity, but issuers will need to be flexible to take advantage of windows of opportunity," said Poon, whose firm's deals this year include the KEXIM bond as well as a $1 billion commercial paper sale by a unit of India's Oil & Natural Gas Corp (ONGC.BO).

Another lender, state-owned Korea Development Bank, is looking to raise at least $1 billion in a bond issue as early as next week. Indonesia, meanwhile, is planning an Islamic bond, or sukuk, worth $1 billion in February, sources have told Reuters.

BUYERS' MARKET

Thanks to the big block trades in bank shares, equity volumes in Asia so far this year are eight times those in the United States, according to Thomson Reuters data.

The pickup in debt sales is global and driven by highly-rated issuers.

"Investors are hungry, but at a price. There's quite a bit of cash on the sidelines," said Khiem Do, head of the Asia multi-asset group at Baring Asset Management.

"How long can you hold on to Treasury yields that are offering 1 or 2 percent, especially when corporate bond yields and equity yields are very attractive to relative to cash and government bonds?" he added.

KEXIM paid 6.25 percentage points over the midswaps rate, a key pricing indicator on debt deals. Only eight months ago, the state lender paid 1.38 percentage points over the same rate for a 750 million euro-denominated five-year issue.

Even so, a debt syndicate banker at a large bank said market conditions have improved substantially since the end of 2008.

Saudi Hollandi completes $207mn sukuk sale

By Souhail Karam

Saudi Hollandi Bank said on Tuesday it has completed an Islamic bond issue worth 775 million riyals ($206.7 million) and would seek to raise another 725 million riyals to boost its capital.

The sukuk, or Islamic bond, sold through private placements, had a 10-year maturity and was priced at 200 basis points (bps) above the Saudi Interbank Offered Rate, which stood at 3.1925 percent for one-year maturities on Tuesday, the bank said in a statement posted on the bourse website.

Analysts said the 200 bps premium appeared to be competitive for the issuer.

"By going private, Hollandi opted for the right placement. Given the market conditions it is a good deal, its very good. It's very expensive for investors and very cheap for issuer," a Bahrain-based analyst said on condition of anonymity.

"It will encourage more issues from the Saudi market," he said noting that the Hollandi issue was more competitive than credit default swaps of the same tenor.

Bond sales have almost dried up in the second half of this year as the global credit squeeze raised borrowing costs, prompting many Gulf borrowers to shelve sukuk sales as banks become more reluctant to lend.

Over the past three months, the Saudi central bank has reduced benchmark lending rates by more than half and directly pumped liquidity in the banking system to ease a liquidity strain which is also affecting other Gulf Arab countries.

Hollandi's bond issue is the first tranche of a $1.5 billion issue that was approved by the bank's shareholders to "support its capital in a sharia-compliant manner," Hollandi said.

"The decision to support the bank's capital is aimed to help Saudi Hollandi achieve its plans to... achieve higher returns for shareholders," Chairman Mubarak Al-Khafrah was quoted as saying in the statement.

Investors will have an option to call the bond at the end of its fifth year of maturity and the return will be distributed bi-annually, it added.

A consortium led by Royal Bank of Scotland and comprising Spain's Banco Santander and Belgian Fortis became Hollandi's largest shareholder after it bought Dutch bank ABN Amro last year.

Islamic bonds replace coupons with payouts backed by tangible assets. Islam prohibits the receipt of interest and requires transactions to be linked to assets, thus deterring the kind of complexities prevalent in conventional financing.
Source : Reuters

Qatar Real Estate in $275mn Islamic financing deal

by Lin Noueihed
Qatar National Bank's Islamic branch and Qatar International Islamic Bank signed on Tuesday a 1 billion riyal ($275 million) Islamic financing deal with Qatar Real Estate Investment Co.
They said in a statement the funds would go to future Qatar Real Estate developments in the Gulf Arab country, which is the world's biggest exporter of liquefied natural gas, estimated to be worth 2.5 billion riyals.

The announcement of the Islamic financing or ijara deal comes at a time when real estate developers in the nearby United Arab Emirates scale back major projects as the global financial crisis freezes credit lines and hits demand.
Some analysts have said that Islamic financing could receive a boost as conventional credit markets suffer, because Islam bans interest and favours revenue derived from underlying physical assets.

QNB Al Islami will contribute 700 million riyals and Qatar International Islamic 300 million in the deal which comes into effect in January.

QNB Al Islami was previously mandated to lead arrange an Islamic finance deal worth 1.37 billion riyals for Qatar Real Estate, which was Qatar's first corporate sukuk and used to fund property projects in Qatar.

Qatar Real Estate said in February it planned to borrow funds by the third quarter, possibly by selling Islamic bonds, to finance up to 3 billion riyals of projects.

The government of Qatar owns 27 percent of Qatar Real Estate. (Reuters)