Thursday 23rd October 2014
slib33
WEDNESDAY TICKER: OCTOBER 22ND 2014: The governor of the Bank of England, Mark Carney, has launched a probe into the causes of yesterday’s disruption to Real-time gross settlement (RTGS), the bank's system for settling high value payments - A major loophole in the UK’s criminal records checking system means that IT staff, including those working in critical functions within financial services firms are not permitted to be vetted for fraud, says Simon Culhane, Chartered FCSI and chief executive officer of the Chartered Institute for Securities & Investment (CISI) - Employment in financial and related professional services in London reached a record high of 703,900 in June 2014– 11%, according to TheCityUK’s October 2014 London Employment Survey - LSE-backed multilateral trading facility Turquoise has launched Block Discovery, a new service designed to allow users within the Turquoise Midpoint Dark Book to trade larger block orders by matching block indications - Dominic Wheatley will take up the job of chief executive of Guernsey Finance as of December 1st. Wheatley will replace Fiona Le Poidevin, whose resignation was announced in July and who will head up the Channel Islands Stock Exchange.

Investors pile into Islamic bonds

Wednesday, 23 May 2012
Investors pile into Islamic bonds April and May looked to be banner months for sukuk. Two deals, one from the Saudi Electricity Company (SEC) and the other, from Banque Saudi Fransi, the Saudi lender part-owned by Credit Agricole, marked two rare but popular US dollar denominated issues which were highly prized by investors. The benchmark deals helped underscore growing investor appetite for Islamic bonds. http://www.ftseglobalmarkets.com/

April and May looked to be banner months for sukuk. Two deals, one from the Saudi Electricity Company (SEC) and the other, from Banque Saudi Fransi, the Saudi lender part-owned by Credit Agricole, marked two rare but popular US dollar denominated issues which were highly prized by investors. The benchmark deals helped underscore growing investor appetite for Islamic bonds.

Saudi Fransi, Saudi Arabia’s fifth largest bank, launched $750m five-year Islamic bond mid-month at par amid strong investor demand for the issue in mid-May. The issue is the bank’s first sukuk sale under a recently-established $2bn debt programme. The sukuk came in at a spread of 185 basis points (bps) over midswaps, at the lower end of its ­indicated range. Initial price guidance was 200bps over midswaps. The deal was heavily oversubscribed, attracting investor orders worth $4bn, under­scoring growing investor appetite for sukuk issuance. The sukuk carries a profit rate of 2.947%. Citi, Deutsche Bank and Credit Agricole were arrangers on the deal.

The deal marks the second dollar denominated sukuk emanating from the Kingdom so far this year. Saudi Electricity’s $1.75bn sukuk, issued three weeks earlier, raised the bar with some $17.5bn in investor orders.  The Saudi Electricity Company (SEC), which is rated A1/AA-/AA- all Stable, is the largest utility in the GCC. The issue was made up of a five year $500m tranche and a $1.25bn ten year element. The ­transaction was led by Deutsche Bank and HSBC marked the inaugural ­international sukuk issuance by SEC and the largest international debt capital markets issuance out of Saudi Arabia for some years. The issuer also wanted to achieve a long tenor bond supported by a diversified investor base, which the arrangers helped secure after a comprehensive global road show. The dual-tranche Sukuk transaction was well received globally and generated a large order book with over 440 investors placing orders.



Shortly after the issue the SEC’s chief executive Ali Al Barrak explained, “The sukuk issue is important to us for strengthening our funding mix, accessing longer-tenor financing, broadening our investor base and helping us become more in line with our global peers while supporting SEC’s capital expenditure requirements.”

Saudi Arabian dollar-denominated bonds come to market relatively infrequently, and attract substantial demand when they do; illustrating that Gulf issuers are benefiting from their own economic micro-climate and are providing something of an oasis for investors starved of comprehensive corporate issuance opportunities. 

Investor appetite for the deals was marked and might just be a sign of a growing preference for Islamic instruments. The evidence is still thin: however Banque Saudi Fransi’s existing $650m conventional bond, which carries interest of 4.5% and matures in 2015, was bid at just over 103.97 in the second week of May, to yield about 2.8%, coming under some selling pressure ahead of the new issue.

Also in mid May Islamic Development Bank (IDB) enhanced the size of its medium term notes (NTN) ­programme from $1.5bn to $3.5bn, which will be issued in both London and Kuala Lumpur. The IDB’s forthcoming medium term sukuk (which is expected to range between five and seven years) will be issued under this programme sometime in June and is expected to raise between $750m and $1bn. Funds will be used to provide blended credits in support of capital goods projects in member countries. IDB, which is AAA-rated, priced a $750m five-year sukuk last May at a spread of 35bps over midswaps to yield 2.35%. According to local Saudi press reports, the sukuk will be 144a-compliant and, therefore, open to investors from the United States; though the IDB did not respond to questions about its forthcoming issue. 

Elsewhere, bond traders expect the first restructuring of an Islamic bond.  United Arab Emirates’ Dana Gas, the Sharjah-based energy company, is expected to restructure its $920m sukuk in coming weeks as investor concerns have heightened over the ability of the utility to meet its payment ­commitments. Up to now no Islamic bonds have been renegotiated though there have been examples of outright defaults (in both Saudi Arabia and Kuwait).

Dana has reportedly hired Blackstone, Latham Watkins and Deutsche Bank to advise on the various options for repaying the sukuk. The company is “committed to finding a consensual solution that is equitable to all stakeholders”, it said in a statement to the Dubai stock exchange.

Meantime, the Central Bank of Bahrain (CBB) says its monthly issue of the short-term Islamic leasing bonds, Sukuk Al-Ijaara, has been oversubscribed by 175%. Subscriptions worth BD35mwere received for the BD20m issue, which carries a maturity of 182 days. The expected return on the issue, which matures in mid-November 2012, is 1.34%.

Tweets by @DataLend

DataLend is a global securities finance market data provider covering 42,000+ unique securities globally with a total on-loan value of more than $1.8 trillion.

What do our tweets mean? See: http://bit.ly/18YlGjP

White Paper

Seeking Optimal ETF Execution in Electronic Markets

Seeking Optimal ETF Execution in Electronic Markets

 
pdf Download PDF View all Whitepapers

Related News

Related Articles

Related Blogs