Sunday, October 03, 2010

QIB sukuk issued, Islamic Development Bank raises sukuk program size

The Qatar Islamic Bank sukuk for $750 million received subscriptions of $6 billion and pricing at 237.5 basis points above midswaps, which was 25 basis points below expectatons. This represents a step forward for primary markets in sukuk in the GCC and should encourage other companies (partcularly those with investment grade ratings) to bring sukuk to market. The resolution of Dubai World's $25 billion debt restructuring, which had made investors more reluctant to invest in the GCC (compared to Asia and particularly Malaysia where sukuk issuance had recovered much more from the financial crisis).

With the purchase of a majority stake by Dubai Islamic Bank, Fitch raised its rating watch on Tamweel to 'positive', although noted significant headwinds for the Islamic mortgage company. The other Islamic mortgage company in Dubai, Amlak Finance, may become part of Emirates Islamic Bank, which is also in talks to acquire Dubai Bank to create a "massive Islamic banking unit".

The Islamic Development Bank increased its sukuk program from $1.5 billion to $3.5 billion, with an unnamed source saying the additional sukuk would be issued to fund rebuilding assistance the IDB was planning in Pakistan after the huge floods in the country. This is positive for the sukuk market and increases the pipeline of new issuance, which seems poised to grow significantly in the GCC over the next few quarters.

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