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ICIEC-led Promoters Launch Co-Guarantee Platform for Africa (CGPA) to Increase the Volume of Insurance and Guarantee Solutions for Project Sponsors and their Bankers

Jeddah – Shariah-compliant export credit and investment insurance in Africa received a major boost when the Co-Guarantee Platform for Africa (CGPA) first mooted in 2018 became operational this month.

The CGPA is promoted by The African Development Bank (AfDB); the Islamic Corporation for the Insurance of Investment & Export Credit (ICIEC), the export credit and investment insurance agency (ECA) of the Islamic Development Bank (IsDB) Group; the African Trade Insurance Agency (ATI), the multilateral African ECA; and GuarantCo, part of the Private Infrastructure Development Group (PIDG), which is supported by the governments of the UK, Switzerland, Sweden, The Netherlands and Australia.

The four promoters signed an MoU at the inaugural Africa Investment Forum (AIF) in Johannesburg, South Africa in November 2018 with the mandate to create an innovative and collective de-risking instrument, to address the perceived high risk across the continent and the lack of capacity of traditional lenders to provide risk mitigation products for projects.

The CGPA is intended to increase the volume of insurance and guarantee solutions available to project sponsors and their bankers in a market-responsible manner. The objective is to mobilize greater amounts of investment that would otherwise not take place in the region in the absence of affordable risk mitigation products.

“We have had several meetings with the partners since we signed the MoU in 2018. We all agreed that there is a strong need for a joined-up effort in co-funding and guarantees through the financing mechanisms and instruments and supported by insurance solutions in order for us to do the intended job for multilaterals and the insurance companies,” explained ICIEC CEO, Oussama Kaissi.

At the 2019 Africa Investment Forum in Johannesburg at end November 2019, the founding parties promoted the merits of the Co-Guarantee Platform, and subsequently the platform was made operational in January 2020.

ICIEC like the other three partners has a huge stake in Africa with 25 years of experience of operating on the continent since its establishment in 1994. Of its 50 member countries, some 24 are from Africa, almost all of which are also members of the AfDB.

There are many guarantee providers that can offer various types of credit enhancement and risk mitigation instruments in Africa, but cooperation among them has been either non-existent or on an ad hoc basis. Hence the need for a more formal collaboration among guarantee providers to maximize the use of their products in Africa.

In a globalised financial services marketplace, the CGPA will eventually be opened to more participants including official development institutions and the private sector with the aim of embracing reluctant risk mitigation and credit enhancement providers across the world to make more projects happen in Africa on more affordable terms for both African and foreign investors and lenders alike.

ICIEC’s role in the CGPA is unique in that it is the first dedicated Shariah-compliant ECA in the world. The CGPA will make an impact especially in the most needed segments of Africa’s infrastructure ask – roads and electricity – two things that are needed in order for the economy to flourish.

ICIEC’s Mr Kaissi has also recommended the financing of SMEs through extending lines of credit to local banks specifically for this purpose. “We have done that in Egypt with Afreximbank. We guaranteed the €200 million loan that was given by Afreximbank to the National Bank of Egypt (NBE) for the use of financing SME activities. ICIEC provided the guarantee against any default by NBE for the repayment. There is a huge need for this kind of cover,” he added.

Dubai Aerospace Signs US$300m Hybrid Islamic/Conventional Credit Facility with Emirates NBD and Emirates Islamic

Dubai – Dubai Aerospace Enterprise (DAE) Ltd., a globally recognized aerospace corporation and one of the largest aircraft leasing companies in the world, signed on 3 February 2020 a US$300 million 5-year dual tranche unsecured term financing facility with Emirates Islamic and Emirates NBD Capital, the investment banking arm of Emirates NBD.

The facility comprises a conventional and an Islamic tranche and can be upsized to US$600 million. The facility will support the future financing needs of DAE’s business.

Firoz Tarapore, Chief Executive Officer of DAE, stressed that the company is keen to consolidate its relationship with Emirates Islamic and Emirates NBD Capital, and to further diversify its pool of liquidity.

According to Salah Amin, Chief Executive Officer of Emirates Islamic the bank is “committed to support the growth and development of prominent local companies like DAE. The funding demonstrates our unique capability to be the leading provider of Islamic banking solutions to corporations and individuals alike”.

In January 2020, DAE signed a US$300 million 4-year unsecured term conventional loan with China Construction Bank (DIFC Branch) and China Construction Bank (Asia) Corporation Limited. The principal amount of the loan can be increased to US$500 million.

Riyad Bank Mandates Banks to Arrange International Tier 2 Sukuk Under its US$3bn Trust Certificate Issuance Programme

Riyadh – Following approval from its Board and the Capital Market Authority of Saudi Arabia, Riyad Bank has mandated J.P Morgan, Riyad Capital, Standard Chartered Bank, First Abu Dhabi Bank and HSBC as Joint Lead Managers “for the potential offer International Tier 2 Sukuk denominated in U.S dollars.”

Riyad Bank in a disclosure to the Saudi Stock Exchange (Tadawul) in early February 2020 also confirmed that it has established a US$3 billion Trust Certificate Issuance Programme, under which the proposed International Tier 2 Sukuk would be issued. The size of the issuance will depend on market conditions.

The purpose of the potential offer is to diversify Riyad Bank’s sources of finance and its maturity, and strengthen the capital base of the Bank, thus supporting the expansion of its credit business and supporting its banking activities.

Albaraka Turk Raises TL825 million Through Three Sukuk Ijara Offerings in January 2020

Istanbul – Leading Turkish Participation bank, Albaraka Turk Katilim Bankasi, a subsidiary of the Bahrain-incorporated but Saudi-owned Albaraka Banking Group, raised TL825 million through three Ijara (Lease Certificate) Sukuk issuances in January 2020. The issuances comprised a TL100 million issuance on 27 January with a maturity of 79 days; a TL275 million issuance on 22 January with a maturity of 111 days; and a third issuance of TL450 million with a maturity of 111 days.

The Sukuk were issued through Bereket Varlik Kiralama, a locally incorporated special purpose company, on behalf of the obligor, Albaraka Turk Katilim Bankasi.

Albaraka Turk executes regular Turkish Lira Lease Certificate Issuances in the domestic market. “With the help of these issuances, we aim to contribute to the development of Islamic Capital Market in Turkey as well as enhance our investor base,” said Malek K. Temsah, Albaraka Turk’s Assistant General Manager of Treasury, Investment Banking, and Financial Institutions.

Strong Demand Marks IILM’s First Auction of Short-term Sukuk in January 2020 totaling US$850m

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) started its auction calendar for 2020 by issuing a total amount of US$850 million short-term A-1 rated Sukuk in three series on 15 January 2020.

The three series’ comprise:

  1. the reissuance of US$300 million with 1-month tenor at a profit rate of 1.85%;
  2. the issuance of two new series for a total of US$550 million, i.e. US$300 million issuance with a 3-month tenor at a profit rate of 1.93%, and US$250 million with a 6-month tenor at a profit rate of 1.95%, respectively.

According to the IILM, the issuance auction attracted strong demand with a total order book of US$1.177 billion and a weighted average bid-to-cover ratio for the three Sukuk series at 138%.

“Apart from the reissuance of US$300 million, the successful issuance of two new Sukuk series marks the inclusion of a new high credit quality asset worth of US$550 million, increasing the supply of the IILM short-term Sukuk from US$1.96 billion to US$2.51 billion and establishes a very strong start for 2020 for our issuance programme. We are extremely pleased with the result as it will allow the IILM to pursue further its mandate of providing the Institutions offering Islamic Services (IIFS) with alternative liquidity management solutions. We would like to thank our Primary Dealers for supporting the IILM issuance strategy by offering multiple tenors every month to fulfil the different needs of investors and build-in an Islamic money market curve”, said Dr. Umar Oseni, the CEO of the IILM.

In terms of geographical distribution, the allocation of the 6-month Sukuk is concentrated in the GCC region at 99% while the 1-month Sukuk is evenly spread across the regions. For the 3-month Sukuk, the allocation to the GCC region is 64%. Bids were also received from Asia and other jurisdictions for a total of 36% of the issuance size.

The IILM Short-term Sukuk programme is rated “A-1” by S&P. The total of IILM Sukuk outstanding will be US$2.51 billion as at 21 January 2020 with a Sharīa’a tradability ratio of 71% tangible assets.

According to the IILM, the primary dealers that participated in the three auctions conducted under the competitive bidding of the Bloomberg AUPD Platform included Abu Dhabi Islamic Bank; Al Baraka Turk Participation Bank; Barwa Bank; Boubyan Bank; CIMB Islamic Bank Berhad; First Abu Dhabi Bank; Kuwait Finance House; Macquarie Bank; Maybank Islamic Berhad; Qatar Islamic Bank; and Standard Chartered Bank.

GFH Capital Closes Latest US$250m Property Portfolio in the US as North American Realty Investments Continue to Attract Islamic Investors

Manama – Another sign of increasing Islamic investment in the US property market, the largest in the world, is the acquisition in February 2020 by GFH Capital, a subsidiary of Bahrain-based Sharia’a-compliant GFH Financial Group, of a diversified US hospitality portfolio in partnership with Arbor Lodging Partners (Arbor) consisting of twelve premium branded select service hotels located in the U.S. states of California, Connecticut and New Jersey with an investment of approximately US$250 million.

The hotels are premium branded with each falling under either a Hilton Brand hotel (Hilton Garden Inn, Hampton Inn, and Homewood Suites) or a Marriott Brand hotel (Courtyard, Residence Inn, and Springhill Suites). GFH and Arbor will undertake a property improvement programme in line with brand standards to create value by increasing revenue generation during the investment period.

The transaction has been undertaken in a joint venture with Arbor, who will hold a 9% stake in the Portfolio and act as the Asset Manager. Arbor is a specialized hospitality asset manager in the US with a strong track record in investing and managing hospitality assets. Arbor Lodging Management, an affiliate of Arbor, will be managing the Portfolio.

According to Hisham Alrayes, CEO of GFH, this is the latest significant investment of GFH in the US markets, which continues to perform strongly and in this robust segment of the hospitality sector. “The Portfolio is well diversified with assets located in key submarkets of the country that are showing growth and overall positive dynamics. The Portfolio also benefits from best in class branding with the Hilton and Marriott franchise affiliations making them well known to target audiences and a part of industry-leading guest loyalty programs driving traffic. We look forward to working with our partner Arbor to add further value to these assets and expect stronger income and returns for our investors,” he added.

GFH’s portfolio of real estate assets in the US market, according to Alrayes, has shown steady growth where the Group has now concluded investments in excess of US$1 billion over the past five years.

“Similarly, we also saw significantly improved contributions from our real estate activities where we advanced our landmark projects launching sales in a number of our iconic developments including Harbour Heights where units were sold to regional and international investors as well as achieving well- timed and profitable exists. Our newly established treasury line also exceeded expectations supporting income growth and adding further diversification to our business. These constitute three key areas of our business that we will be working to further diversify and grow in 2020,” he said.

Qatar First Bank Acquires US$117m Realty Portfolio in Washington – its Fourth Such Deal in the US Market

Doha – Qatar First Bank (QFB), the first independent Sharia’a compliant bank authorized by the QFC Regulatory Authority (QFCRA) and a listed entity in the Qatar Stock Exchange, has completed the US$117 million off-market acquisition of 90 North, a four-building, 262k-square-foot office campus located in Bellevue, Washington. The property is fully rented by two tenants T-Mobile and Mindtree.

The 90 North Corporate Campus is a four building class “A” campus property situated on approximately 20 acres and strategically located at Seattle, Washington. This acquisition is QFB’s sixth product offerings and fourth in the US real estate market offering investors access to international investment opportunities through Investment Management Platform.

“In line with our new strategy,” explained Ayman Zaidan, Deputy CEO of QFB, “we source and structure investment opportunities to cater to the increasing demand of local and international investors. Our products help investors gain access and reach to the US real estate market with unique properties that offers Shariah-compliant investments. Our new strategic direction has reinforced our vision of a risk-sharing collective investment operating business model.”

Additionally, the product offers an investment in a stable mature market. It’s strategy is to monetise its private equity portfolio and reinvest in more secure assets across politically stable jurisdictions.

“This investment provides clients with ten years of strong, credit-backed contractual cash flows with minimal capital obligations and a best-in-class asset in a market characterized by large, market-leading companies such as Microsoft, T-Mobile, Nintendo, REI, Amazon, Google, Facebook, Oculus, Costco, AT&T, and Boeing,” added Zaidan.

This realty acquisition was offered to the bank’s clients on a private placement basis and potential clients are subject to regulatory requirements of QFMA and other regulators to be eligible to participate in such an investment opportunity

Securities Commission Malaysia Publishes Guidelines on Digital Assets and Framework for Fundraising Through Digital Token Offering in Malaysia

Kuala Lumpur – The Securities Commission Malaysia (SC) published in mid-January 2020 Guidelines on Digital Assets that outline the framework for fundraising through digital token offering in Malaysia.

In the SC’s earlier consultation paper on the “Proposed Regulatory Framework for The Issuance of Digital Assets Through Initial Coin Offerings”, an Initial Coin Offering allows a company with an innovative business proposal to raise capital before it is able to do so through venture capitalists or lenders. It also allows the company to raise funds without selling their equity or taking out a debt while developing their innovative ideas.

“Digital tokens offering can provide another alternative fundraising avenue for early stage entrepreneurs. This initiative supports Malaysia’s Shared Prosperity Vision 2030 (SPV2030) by supporting the growth of SMEs and micro businesses which are targeted to contribute 50% to Malaysia’s GDP. It also aligned with SPV2030’s aspiration to create 30% high technology Malaysian companies,” said Datuk Syed Zaid Albar, Chairman of the SC.

The Guidelines incorporates feedback received by the SC following the issuance of the consultation paper. Based on the responses received, there is overwhelming industry support to the SC’s proposal to leverage the expertise of a platform operator to review applications for issuance of digital tokens for fundraising.

Thus, the Guidelines set out the requirements for all offerings of digital tokens to be carried out through an initial exchange offering (IEO) platform operator that is registered with the SC. In this regard, the IEO platform operator would be required to carry out the necessary assessment and due diligence to, among others, verify the business of the issuer and the fit and properness of the issuer’s board, as well as understand the features of the digital tokens. During the first phase of the implementation of the Guidelines, the SC will work with the relevant platform operators in assessing eligible issuers.

Prospective issuers, stressed the SC, must also satisfy governance and capital requirements in order to be eligible to raise funds through an offering of digital tokens. Issuers are required to demonstrate that their proposed project or business provides an innovative solution or a meaningful digital value proposition for Malaysia.

An issuer may raise funds up to a ceiling of RM100 million and tap on investments from retail, sophisticated as well as angel investors, subject to the investment limits provided in the Guidelines. Each issuance must be accompanied by a Whitepaper, which should provide investors with among others, material information on the issuer, the digital token and the utilisation of funds obtained through the issuer’s fund-raising exercise. After the offering has been successfully completed, the SC will conduct post issuance monitoring of the utilisation of the proceeds.

The Guidelines also sets out the requirements for IEO platform operators and the process to seek authorisation from the SC. The Guidelines will be brought into force in the second half of 2020 to allow potential issuers, platform operators and investors to familiarise themselves with the requirements in the Guidelines.

The SC would like to remind members of the public that until the coming into force of the Guidelines, no person is permitted to offer or issue any digital tokens in Malaysia.

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