Friday, August 14, 2009

Petronas sukuk 4th 144A compliant, Nakheel sukuk, Cagamas RMBS sukuk, RHB twarruq, resturcturing sukuk, diversity in Shari'ah views

The Petronas sukuk recently issued for $1.5 billion is another that complies with the U.S. Securities & Exchange Commission's 144A rules which makes it more accessible to investors in the United States. This would be the fourth sukuk that complies SEC Rule 144A after the Indonesian sovereign sukuk issed earlier this year. Another Malaysian issuer, Cagamas, listed MYR4 billion ($1.1 billion) of residential mortgage-backed sukuk structured as a musharaka.

A Reuters blog describes a meeting held by Thomson Reuters about whether the diversity of opinions among the Shari'ah scholars hampers the industry. I think this is an interesting discussion but the diversity of opinions, in my opinion, is a benefit for the industry because it keeps the industry working to meet the broad set of interpretations across the various geographies in which Islamic finance operates as well as providing a source for innovation to occur which can help the industry grow. That said, there are issues of standardization globally that, like any regulatory regime, hamper inter-regional development, but these are in my opinion outweighed by the benefits from a continuing discussion among Shari'ah scholars of the direction the industry should move.

RHB Islamic developed a tawarruq product based on telecommunication airtime as the underlying asset.

The National has a blog post on the Nakheel sukuk and in particular whether a restructuring is possible without jeapordizing the company's future access to the capital markets. It also covers the problems created by the Dubai government's implicit backing through a guarantee by Dubai World and compares this with the problems the U.S. government faced when Freddie Mac and Fannie Mae, two government-sponsored enterprises, ran into trouble and were at risk of failing. With the recent plans for the second tranche of the Dubai government's $20 billion bond issue which is reported to be used to support government-related entities like Nakheel and Dubai World, there may be a resolution to the specific problem posed by the maturity of Nakheel's $3.5 billion sukuk in December, but the greater issues raised will not be resolved as quickly. Back in May, I wrote my analysis of the Nakheel sukuk.

An article in Financier Worldwide discusses the particular difficulties of resolving restructuring/bankruptcies in the Middle East, particularly those involving Islamic financing structures.

Other News

  • A writer in the New Straits Times discusses the potential for Islamic finance to play a role in re-establishing trust in the global financial system.
  • Lahem Al-Nasser reviews the articles he has written about sukuk in Asharq Alawsat.
  • Bangor University in Wales has seen significant uptake of its Masters courses in Islamic Banking & Finance and may offer an MBA with a focus on Islamic finance.
  • An Islamic financial institution in India expands as the country's Islamic finance industry slowly grows.

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