Bank Sukuk – QIIB US$500m Sustainability Oryx Sukuk

QIIB Returns to International Sukuk Market in January 2024 with Benchmark US$500m Offering as Sustainability Sukuk Continues to Gain Market Momentum

Qatar International Islamic Bank (QIIB), a regular issuer of Sukuk in the international market since 2012, successfully returned to the international Sukuk market in January 2024 with its maiden benchmark US$500 million Sustainable ‘Oryx’ Sukuk offering.  

The Sukuk, which has a tenor of 5 years and a maturity of January 2029, was issued by QIIB Senior Oryx Ltd, a special purpose vehicle issuer incorporated in the Cayman Islands, on behalf of the Obligor, QIIB.  The Sukuk was issued under the Bank’s US$2 billion Trust Certificate Issuance Programme, which was updated on 11 January 2024.

QIIB had appointed Standard Chartered Bank as the Global Coordinator for the transaction, along with Al Rayan Investment (the capital markets division of Masraf Alrayan Group), Dukhan Bank, Emirates NBD Capital, KFH Capital, Mashreqbank, The Islamic Corporation for the Development of the Private Sector (ICD) (the private sector funding arm of the Islamic Development Bank (IsDB) Group), and QNB Capital as Joint Lead managers and Bookrunners for the issuance. A series of virtual investor calls followed with interested parties in the UK, Europe, GCC, MENA region, Asia and Offshore US Accounts.

According to Dr Abdulbasit Ahmed Al-Shaibei, the seasoned QIIB Chief Executive Officer, the sustainability Sukuk from QIIB witnessed significant investor interest, with the order book reaching US$4 billion and being eight times oversubscribed. The transaction was completed on 24 January 2024 with the issuance finally priced at a spread of 120 basis points (bps) above the Five-year U.S. Treasury rate, with a final yield of 5.247% annually.

QIIB, one of the medium-sized Qatari Islamic banks in terms of total assets, has a rich experience in Sukuk issuance since its successful foray into the market with its debut US$700 million Sukuk in 2012 and followed by two issuances in 2019 of US$300 million and US$500 million, which were both listed on the London Stock Exchange.

“We are extremely pleased with the success of this sustainable Sukuk issuance and its outstanding pricing,” declared Dr Al-Shaibei. “It is a defining moment for us as it marks the first issuance of sustainable sukuk following the establishment of a dedicated framework for sustainable financing in the bank, which aims to fund projects that contribute to environmental and social benefits. The sustainable Sukuk we have issued is part of our active engagement in aligning with the Third Financial Sector Strategy recently approved by the Qatar Central Bank, encompassing principles, particularly with regard to sustainability, aiming further development and prosperity in the financial sector from various perspectives.”

Dr Al-Shaibei further stressed that “the significant success of the Sukuk issuance and its favourable pricing clearly indicates the great confidence that QIIB enjoys internationally, based on strong credit ratings and the strength of the Qatari economy, which provides support to various economic sectors in the country, especially banking. We have observed exceptional interest in QIIB’s Sukuk, giving us more confidence to build partnerships regionally and internationally related to sustainability, focusing on programmes, serving the community and financing projects that provides to basic services and infrastructure at reasonable rates.”

QIIB’s new Sukuk issuance under the approved US$2 billion programme, he added, achieves several objectives, including enhancing sustainability-linked financing, solidifying the Bank’s presence in global financial markets, and providing the Bank with the opportunity to form new partnerships with investors from around the world.

The Sukuk certificates, rated ‘A-’ by Fitch Ratings, were admitted to trading on the London Stock Exchange (LSEG’s) International Securities Market and are listed on the LSEG’s Sustainable Bond Market. The issuance was offered to sophisticated investors outside the US in reliance on Regulation S under the US Securities Act of 1933. The offering received overwhelming support from various countries, including more than 120 investors from the GCC and the MENA region although, significantly, more than 55% of the investors were from outside those regions.

The issuance was Qatar International Islamic Bank’s first sustainable Sukuk issuance and the first sustainable sukuk issuance from a Qatari bank to be listed on the London Stock Exchange. The transaction builds on Qatar’s commitment to sustainability and underscores the banking industry’s efforts to reach out to the green investor community and attract funds that will support it in creating a more sustainable environment for our societies.

The Sukuk was also issued under QIIB’s Sustainable Finance Framework which was published in January 2024. Under the Framework, “QIIB will allocate an amount at least equivalent to the net proceeds of the Sustainable Financing Instruments issued under this Framework to finance and/or re-finance, in whole or in part, sustainable projects which meet the eligibility criteria of the following Eligible Sustainable Project categories. 

In a Second Party Opinion on 10 January 2024, Sustainable Fitch affirmed QIIB’s Sustainable Finance Framework’s Pillar Alignment Key Drivers, namely Use of Proceeds, Green Projects and Additional Information as ‘Good’.

“Sustainable Fitch considers the sustainable finance framework of Qatar International Islamic Bank (QIIB) and the use of proceeds (UoP) included in this framework to be aligned with the ICMA Green Bond Principles 2021 (GBP), Social Bond Principles 2023 (SBP) and Sustainability Bond Guidelines 2021, as well as the Green Loan Principles 2023 (GLP) and Social Loan Principles 2023 (SLP) of the LMA [Loan Market Loan Association], LSTA [US Loan Syndications and Trading Association] and APLMA [Asia Pacific Loan Market Association],” said the rating agency.

The UoP, it further noted, included both green and social categories. “We positively assess the green UoP categories, especially those dedicated to financing renewable energy projects and clean transportation. In the social categories, we positively evaluate financing access to essential services such as healthcare and education as well as those related to employment generation.”

Similarly, QIIB also sets out an exclusion list that means it will not finance non-Sharia’a compliant activities or activities that the market considers environmentally or socially harmful. The Bank, added Fitch, is committed to report the share of projects that are financed versus refinanced, but it has no commitment to keeping a certain level of new projects in the portfolio, which would increase the additionality of the instrument.

QIIB was established in 1990 as the second Islamic bank in the State of Qatar and is currently the third largest Islamic bank in terms of assets and market capitalization. The Bank began its operations in 1991 and is listed on the Qatar Stock Exchange. A customer-centric bank, QIIB’s role in the banking landscape is gaining prominence as Islamic Banking acquires momentum as a viable and sustainable proposition alongside conventional banking. International rating agency Fitch has rated QIIB at ‘A-’, with a positive outlook while Moody’s has given ‘A2’ with a stable outlook.

The US$500 million debut sustainable Sukuk issuance is to diversify the sources of funding with different maturities and to tap into new markets. QIIB’s decision to list the Sukuk on the London Stock Exchange for the third time is considered a strategic decision based on the London Stock Exchange’s position as the leading venue for Islamic finance in Europe.

Dr Al-Shaibei commented at the listing bell ringing ceremony at the LSE in January: “We are very pleased with the success of our first Sustainable Sukuk issuance, which is considered the first out of all Qatari banks to be listed on the London Stock Exchange. We are confident that London plays a key role in the Global Sukuk Market, and an important centre for Islamic banking instruments. We are proud that confidence in the Qatari economy has reached record levels among various categories of investors around the world”.

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