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Bank Sukuk – Kuwait International Bank

Kuwait International Bank Issues Debut Sukuk as More Kuwaiti Entities Line up to Enter Market

Kuwait International Bank (KIB) successfully priced a US$300 million AT1 Perpetual Tier 1 Capital Basel III Sukuk on 29 May 2019. The Sukuk was issued through KIB Tier I Sukuk Ltd, a wholly-owned special purpose vehicle of KIB.

The Sukuk, which has a 5-year non-Call tenor and was issued under the Mudarabah (trust financing) structure, was priced at a profit rate 5.625 % per annum payable bi-annually.  The issuance, according to KIB, received very strong investor demand and was oversubscribed 15 times with the order book closing at US$4.6 billion.

Citi and Standard Chartered acted as joint global coordinators, with Dubai Islamic Bank, First Abu Dhabi Bank, KFH Capital and KAMCO joining as joint lead managers and bookrunners. Boubyan Bank acted as co-manager.

Following a weeklong roadshow in May, the issuance, according to KIB, attracted investors from 26 countries, with final distribution of 51 % to international investors and 49 % to regional investors.

“This Sukuk transaction,” said Raed Jawad Bukhamseen, Vice Chairman and CEO of KIB “is a clear evidence that Kuwait possesses the components required to attract international investors to enter the Kuwaiti market.  We are very pleased with the outcome of this Sukuk transaction, which is the first time issued by KIB.  This AT1 Sukuk has been issued as an advanced capital instrument under Basel III Capital Adequacy compliance and in line with the rules and regulations of the Central Bank of Kuwait and the Capital Markets Authority, to be made available for trading in the secondary market once issued. This Sukuk adds a new source of capital to KIB, which will support diversification of its capital and funding as well as supporting the expansion strategy and enhancing the Bank’s capital base in accordance with Basel III guidelines.”

The issuance of perpetual Non-Call 5-Year Sukuk will enable the Bank to maintain a prudent balance between its various capital components and to boost the bank’s growth. KIB is particularly buoyed by the exceptional demand for the Sukuk, which it said “is clear indication of the confidence shown by both international and regional investors in our strategy, as well as our consistent financial performance, and in the strength of the Kuwaiti banking sector. This issuance of Sukuk will also support the Bank’s planned growth and development plan for the coming years with a favorable cost of funds.”

Since the passing of a Sukuk law and regulations in Kuwait in 2017, the Kuwaiti market has been warming up to Sukuk as a fund-raising instrument given the surge of such activity in neighbouring Saudi Arabia, Qatar, Bahrain and UAE, where both sovereign and corporate issuances are now the norm.

The Sukuk is listed on the Irish Stock Exchange on its Euronext Dublin platform.

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