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GFH Financial Succesfully Prices US$300m Sukuk Wakala/Tawarruq as Group Eyes More Realty Transactions in the US and UK

Bahrain-based GFH Financial Group, formerly Gulf Finance House, successfully priced a US$300 million Sukuk Wakala/Tawarruq on 22 January 2020.

The Sukuk, which has a tenor of 5 years and matures on 28 January 2025, was jointly arranged by Société Générale, Standard Chartered Bank, Emirates NBD Bank, Kamco Investment Company, Mashreqbank, SHUAA Capital, and Warba Bank. The issuer and trustee to the transaction is GFH Sukuk Company Limited, a Cayman Islands incorporated exempted company, which issued the certificates on behalf of the obligor, GFH Financial Group.

In a statement, GFH Financial Group said the issuance received strong demand from international investors “reflecting market confidence in GFH and its subsidiaries (the Group) and recognition of its healthy financial position, sound strategy and business model.” The order-book for the Certificates was oversubscribed 2.5 times exceeding US$750 million. The proceeds of the Certificates, according to GFH Financial Group, will be used to enhance the financial position of the Group and to fund its next phase of growth. The Sukuk was priced at a coupon rate of 7.5% per annum.

Not surprisingly, international investors were allocated 47% of the issuance with the additional 53% taken up by regional investors. In terms of the types of investors, 61% were fund managers and 39% were financial institutions.

The Sukuk certificates are supported by a ‘B’ rating from Standard & Poor’s (S&P) and Fitch Ratings. “The US dollar certificates’ ratings are driven solely by GFH’s Long-Term Issuer Default Rating (IDR) of ‘B’. This reflects Fitch’s view that default of these senior unsecured obligations would reflect the default of GFH in accordance with Fitch’s rating definitions. The payment obligations of GFH (in any capacity) under the transaction documents will be direct and unconditional and shall at all times rank at least equally with all other unsecured and unsubordinated obligations of GFH, present and future,” said the rating agency.

This transaction, said Hisham Alrayes, CEO of GFH, “is further recognition from the market of the success of GFH’s transformation into a sound and well diversified financial group. The strong uptake from both regional and international investors attests to the strength of our strategy, our financial health and performance and, importantly, to our future prospects as we push forward in further building our business and position as a leading regional and international investor. The proceeds of the Certificates will enable us to continue to build and deliver even greater value to our investors, shareholders and the economies in which we invest.”

The Sukuk certificates were admitted for trading to the London Stock Exchange’s International Securities Market on 29 January 2020.  

In February, GFH Financial Group reported net profit attributable to shareholders for FY2019 of US$80.1 million compared with US$114.1 million for the previous year, a decrease of 29.8% resulting primarily from higher provisions in the commercial banking subsidiary of the Group.

Total equity attributable to shareholders was US$1.0 billion at 31 December 2019 from US$1.06 billion at 31 December 2018, a decrease of 5.7% due to additional acquisition of an infrastructure project and treasury share buyback programmes. Total assets of the Group were US$5.9 billion at 31 December 2019 compared with US$5.0 billion at the previous year end, an increase of 18.2%. Total Assets plus fund under management increased from US$ 8.5 billion in 2018 to US$ 10.0 billion in 2019.

During 2019, the GFH Group concluded six transactions for a total deal value of US$557 million across the UK, US and GCC markets.

GFH Chairman, Jassim Alseddiqi, stressed that “the Group was pleased to report continued growth and progress and a subsequent double digit increase in income for 2019. During the fourth quarter, we approached the debt capital markets in a landmark transaction for the Group. The overwhelmingly positive response that we received is no better testament to where GFH stands today and market recognition and confidence in the Group and where we are heading.

“We went on to announce in January 2020, the successful pricing of a US$300 million 5-year Sukuk. Importantly, this included strong demand from international investors who were allocated 47% of the issuance further diversifying our sources of funding and building GFH’s brand with global investors. These proceeds will be used to fund our next phase of development in 2020 and beyond.”

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