GFH raises $200m in sukuk bond issue


Gulf Finance House (GFH) has completed its first sukuk bond issue raising $200 million in a five year deal which was marketed principally in Asia and Europe.
The transaction was jointly led and arranged by HSBC and Dresdner Kleinwort with Emirates Islamic Bank and Emirate Bank International, acting as senior co-lead managers.
Marketing commenced on July 3 and closed on July 10 with the books opening subsequently. The majority of investors' subscriptions were scaled back as demand exceeded the amount required.
The GFH sukuk is rated BBB- by Standard & Poors and will be listed and traded on the London stock exchange initially, with a proposed dual listing at the Bahrain stock exchange subsequently. The sukuk is secured by a charge over a floating pool of assets and is priced
competitively. The initial price guidance given by the bank was not widened reflecting the strong investor confidence in the bank's sukuk issue. The proceeds raised from the sukuk will be used to match fund the investment bank's medium term strategic investment portfolio.
government-linked companies.”

In December last year, only 40 per cent of Dubai property developer Nakheel Group's $3.52 billion sukuk sale, the world's largest, was allocated to the Middle East, Barclays said.
Subsequent sales have seen the fraction shrink to as low as 20 per cent, Barclays' Islamic banking chief Arul Kandasamy said.
"What conclusions can you draw? One is that investors want to have credit exposure to the Middle East, and the fact that it's a sukuk is neither here nor there," he said.
Last month, Dubai Ports World priced its non-convertible 10-year Islamic bond at 115 basis points over US Treasuries with only a quarter of the money raised coming from the Middle East.
In 2006 its parent firm, Dubai's Ports Customs and Free Zone Corporation (PCFC), priced its $3.5 billion two-year convertible Islamic bonds at 200 basis points over the equivalent US dollar swap selling 80 per cent in the region.
Bonds that can be later converted into stock usually offer lower returns, as do bonds with relatively short tenure.
Crucially, PCFC was not rated before going to market. "Islamic bonds were priced a little bit higher, there was a risk premium to be paid. That has disappeared... It's little a bit anecdotal, but I can assure you it's fact," Geert Bossuyt, head of Middle East structuring at Deutsche Bank said.
Sukuk comply with Islam's ban on interest and the trading of debt, and are backed by physical assets.
Initially driven by demand from the world's 1.2 billion Muslims for investments that comply with their beliefs, bankers say the instrument is now seen as a conventional one, attracting the world's conventional investors, who outnumber Muslim buyers.

Bankers' estimates for global sukuk sales this year range from $27 billion to $50 billion, up from $10.2 billion last year, according to ratings agency Moody's. Analysts forecast total investment grade European corporate bond issuance this year at up to 150 billion euros ($200 billion).


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