Yasaar Media report, Canadian sukuk, corporate sukuk market in the GCC

Yasaar Media released a report on Islamic investment banks recently. I am still reading the report and hope to have a post dedicated to it here and on my blog at Zawya.com. The report is available from Yasaar Media's website (pdf)

The second North American sukuk is expected to come from of Canadian company, Bear Mountain Resorts, by October. The sukuk will fund part of a resort community near Victoria, British Columbia and is expected to be about $380 million. The sukuk is being launched with the assistance of Siraj Capital whose CEO Ibrahim Mardam-Bey worked on the East Cameron sukuk which is now in bankruptcy while he was at Lebanese firm BSEC.

A new fund being offered by Dubai Islamic Bank provides investors with capital-protected returns based on a long-short strategy tracking the Rogers International Commodity Index Enhanced ex-Lean Hog, a commodity index. The structure of the transaction is not specified but seems like it is similar to a controversial product that used a total-return swap on an index and is likely to restart arguments about the products' desirability from a Shari'ah perspective that were raised by Sheikh Yusuf DeLorenzo.

Despite the many sovereign sukuk being issued by GCC governments, the corporate sukuk issuance market may remain largely frozen until 2010 according to Arab Banking Corporation managing director Naveed Khan. The delay between new sovereign issues and new corporate issues is expected to be caused by the higher pricing of the sovereign sukuk compared to where they were before the credit crisis.

Other News

• HBG Holdings will invest in companies listed on London's Alternative Investment Market (AIM) through a Cayman Islands-domiciled Shari'ah-compliant private equity fund. HBG Holdings' shareholders are primarily institutional and private investors from the Gulf region.
  
• One of the sukuk funds launched recently, Emirates Investment Services' Emirates Sukuk Fund No. 1, announced it had gained 8.5% in the first 3 months since inception.
  
• Investors in Saad Group's Golden Belt 1 Sukuk are forming a committee to represent them, according to Reuters.
  
• Malaysia is 'well positioned' to help Islamic finance in Europe according to Malaysia's ambassador to Brussels, Hussein Hanif.
  
• An article about Abu Dhabi National Energy (Taqa) includes the note that the planned sukuk from Ras al Khaimah may offer a coupon between 8% and 8.5%.
  
• In the Islamic finance industry, aggregate size numbers are always rather suspect because there is no centralized methodology on how it is calculated, but according to one article, the industry now has more than $1 trillion in assets.
  
• Despite attempts by the Japanese government to attract Islamic finance, it is having difficulties gaining steam and the Japan Bank for International Cooperation (JBIC) sukuk that has been planned for a while may be further delayed.
  
• Australian investment bank Macquarie is in Malaysia and may be considering issuing a sukuk.
  
• Islamic finance may provide benefits to Muslim and non-Muslim homeowners in Scotland, according to an article.
  

Islamic finance in Australia, U.K.; sukuk issuance in the GCC; the problems of default in sukuk markets

The Assistant Treasurer of Australia gave a speech (text of speech) at the opening of an Islamic banking & finance seminar at Latrobe University. The text of the speech, which includes a review of the industry in Australia. The Muslim Community Co-operative (Australia) Ltd. (MCCA) hopes to receive a banking license to convert to become the first Islamic bank in the country within the next three years. It is currently licensed as a non-bank financial institution. Regardless, the Assistant Treasurer beliees that there will be an Islamic bank in Australia within five years.

The UK treasury minister responsible for Islamic finance policy, Sarah McCarthy-Fry, said in a speech at the Sukuk Summit that the UK Treasury's decision not to issue a sukuk "in no way reflects a diminished government commitment to Islamic finance in the UK. I hope that other progress, including the measures announced in the recent Finance Bill (2009), will pave the way for the Islamic finance industry to grow".

The Emirate of Ras Al Khaimah is marketing the second part of its $2 billion sukuk. The Islamic Development Bank could increase its $500 million bond which is part of a five-year plan to issue $6 billion in sukuk.

Up to 5-8% of all sukuk could be at risk of default, according to industry experts, particularly those financing real estate projects and which are not backed by any sovereign or quasi-sovereign company. Also, Malaysian Central Bank governor Zeti Akhtar Aziz does not see any systemic implications of the default of the Saad Group sukuk.

In addition to GCC-based Istikhlaf, there are several groups considering launching a mega-Islamic financial institution with more than $1 billion in paid up capital in Malaysia according to Bank Negara, the Malaysian Central Bank.

There is an interesting article from Reuters that describes the tension between the Shari'ah restrictions and pressure from institutions seeking the highest return for their investors. The article also notes that this desire for profits as well as some compensation from company management is paid to scholars as 'incentive' payments stoking fears of conflict of interest, particularly for scholars who sit on many institutions' Shari'ah boards.

Other News

• The National has a good article on the development of takaful, and in particular the recent growth in re-takaful.
  
• Moody's revises its JAFZ sukuk rating to reflect a greater degree of inter-dependence with Dubai world than originally indicated in the original assumptions.
  
• HSBC Holdings head of capital markets for the MENA region, Rajiv Shukla, says that the Saudi Electric Company sukuk could mark a turning point in the sukuk market because "There is a solid pipeline of potential issues, and we should see more in the second half of this year".
  
• There is a summary of the sukuk market and its potential that is fairly comprehensive.
  
• Another Islamic fixed income fund is launced, this one by Badr Al-Islami and Mashreqbank.
  
• Noor Islamic Bank converted the UAE government deposit into Tier II capital to improve its balance sheet and raise its capital adequacy ratio.
  

Nakheel may try to tender its sukuk, interview with Anouar Hassoune, opinion piece by Rushdi Siddiqui

Nakheel may make a tender offer for its $3.52 billion sukuk that comes due in December at a discount. However, many investors are likely to reject the tender offer in the hope of receiving full repayment at maturity, in part because Nakheel may receive government support from the Dubai government if it is unable to make payment on its own, as Phillip Lotter, a vice president at Moody's Investors Services said June 10. The prices in the secondary market fell to 63.5 cents on the dollar before rebounding to 87 cents yesterday. I wrote a summary of the Nakheel sukuk on my Zawya blog back in May.

Emirates Business 24/7 has a great interview with Anouar Hassoune, the Vice President and Senior Credit Officer at Moody's Investors Service about the Islamic finance, in particular, the resiliency of the industry at a time when several stand-alone Islamic investment banks have defaulted on their obligations.

Rushdi Siddiqui, head of Islamic finance for Thomson Reuters has an opinion piece saying that Islamic financial institutions should undergo stress tests like the major banks in the U.S. did earlier this year to increase confidence in the industry.

European banks, including a German bank but no French banks, have expressed interest in financing and running the $3 billion IPO planned for Istikhlaf, the planned $10 billion mega-Islamic bank. Sheikh Saleh Kamel and Adnan Yousef who have been the driving force for the bank's launch are not going to take management roles in the banks following the IPO.

Other News

• The Islamic Development Bank is planning to issue the first $500 million sukuk over the next few weeks as part of its planned 5-year, $6 billion sukuk offering.
  
• Indonesia's exchange-backed bond pricing agency will begin publishing daily prices of bonds and sukuk to facilitate greater liquidity in the secondary markets and help issuers price new issues.
  
• The Dubai government is providing AED 5 billion ($1.36 billion) in financing to merge two banks together into the Emirates Development Bank. However, despite the expectation that Amlak and Tamweel, the troubled Islamic mortgage lenders, would be included in the new entity they were not part of the announced plan.
  
• The flood of new sovereign sukuk issues continues as the Ras Al Khaimah Investment Authority (RAKIA) is planning to issue a $500 million sukuk in July.
  
• A Bahraini Islamic investment bank is financing construction of a $50 million mall in the country.
  
• Gulf news has two articles about Islamic banking and in particular the use of Islamic financial institutions by non-Muslims in the Gulf.