Bank Consortium Arranges US$2bn Debut Hybrid Murabaha/Conventional Financing Facility for Egypt

Dubai – A consortium of banks have arranged a US$2 billion hybrid Conventional and Islamic Syndicated Term Facility for the Government of Egypt in August 2020. This is Cairo’s first such foray into the international markets.

The Facility, signed with the Egyptian Ministry of Finance, aims to diversify the country’s sources of funding and its access to international capital market instruments. The facility also marks Egypt’s first Murabaha syndicated facility. The proceeds of the Facility would primarily be utilised to finance the country’s budgetary requirements and support its economic recovery amidst prevailing COVID-19 volatility in the global markets.

Amidst a challenging market backdrop due to the on-going COVID-19 crisis, the transaction received an overwhelming response from the market and was 1.75 times oversubscribed. The Ministry of Finance chose to exercise the green-shoe option to upsize the Facility to US$2 billion from the launch size of US$1.5 billion. The Islamic/conventional split of the facility are two tranches of US$1 billion each.

Emirates NBD Capital and First Abu Dhabi Bank acted as the Joint Global Coordinators and Initial Mandated Lead Arrangers and Bookrunners on the Facility.

Mashreqbank, ABC Islamic Bank, Arab Banking Corporation, HSBC, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, Gulf International Bank, Abu Dhabi Islamic Bank, Al Ahli Bank of Kuwait – DIFC Branch, Dubai Islamic Bank, Intesa Sanpaolo, Samba Financial Group and Sharjah Islamic Bank acted as mandated lead arrangers and bookrunners, while Citibank (London Branch) and Emirates Islamic joined in as lead arrangers.

According to Mohamed Maait, Egyptian Minister of Finance, “the appetite and interest received from regional and international banks in the syndication is a signal of Egypt’s successful reform programme. Amidst challenging conditions, Egypt is reaping the fruit of consistent efforts towards enhancing its economy’s resilience. Egypt is continuously diversifying its funding sources by tapping regional as well as Islamic sources of finance.”

Bank Consortium Arranges SAR9bn Syndicated Murabaha Facility for Saudi Electricity Company

Jeddah – A consortium of local banks arranged a SAR9 billion Syndicated Murabaha facility in August 2020 for Saudi Electricity Company (SEC), the largest electricity utility in the Gulf Cooperation Council (GCC) countries.

The facility, which has a 7-year tenor, was arranged by The National Commercial Bank, Al Rajhi Bank, Riyad Bank, Samba Financial Group, Bank Albilad, Banque Saudi Fransi and The Saudi British Bank. The facility is an unsecured borrowing and the proceeds, according to SEC in a filing with the Saudi Stock Exchange (Tadawul), will be used for “general corporate purposes including capital expenditure.”

SEC is rated A- by Fitch (stable outlook), A- by S&P (stable outlook), and A2 by Moody’s (negative outlook). At the time of writing it had mandated HSBC and MUFG as Green Structuring Advisors, along with First Abu Dhabi Bank, HSBC, J.P. Morgan, MUFG and Standard Chartered Bank as Joint Lead Managers, to arrange a series of fixed income investor calls in Asia, Europe and the Middle East for its debut Green Sukuk.


Malaysian Mortgage Corporation, Cagamas, Raises RM1.115bn (US$268.7m) Through Two Hybrid Sukuk/Bond Offerings in August to Fund Purchases of Mortgages from the Financial Market

Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, continues to play a major role in Sukuk issuance and in the Islamic mortgage securitization market in Malaysia with its latest two offerings in August 2020.

Cagamas Berhad issued a total of RM1.005 billion (US$242.2m) of commercial papers on 24 August, comprising 6-month Conventional Commercial Papers (CCPs), 3-month CCPs and 3-month Islamic Commercial Papers (ICPs).

“Bank Negara Malaysia recently announced the largest ever contraction of 17.1% for the Malaysian economy in the second quarter of 2020. The decline reflected an unprecedented impact from the stringent containment measures to control the COVID-19 pandemic. The overall 2020 gross domestic product (GDP) estimate has also been revised lower from -3.5% to -5.5%. With the downward revision of GDP from -3.5% to -5.5%, the pandemic situation onshore and the government’s ability to use fiscal measures to boost growth will be key developments for further direction,” said President/Chief Executive Officer of Cagamas Berhad, Datuk Chung Chee Leong.

“While the market remains cautious over uncertainties ahead, the Company has successfully priced its CCPs and ICPs issuances competitively at 21 basis points to 36 basis points, above respective Malaysian Government Securities (MGS)/Malaysian Government Investment Issues (MGII),” he added.

The second issuance on 10 August totalled RM110 million comprising 1-year Conventional Medium-Term Notes (CMTNs) and Islamic Medium Term Notes (IMTNs). “The resurgence of COVID-19 infection cases globally coupled with renewed US-China tension dominating headlines, resulted in safe-haven assets continuing to be highly sought after. On the domestic front, demand for fixed income instruments remain supportive due to the easing of monetary policy and fiscal stimulus packages coupled with benign inflation outlook,” said Datuk Chung Chee Leong.

“The issuances were competitively priced at 2.15%, 37 basis points and 35 basis points above respective Malaysian Government Securities (MGS)/Malaysian Government Investment Issues (MGII),” he added. The transactions marked the Company’s twelfth issuance exercise for the year and brings the year-to-date issuance amount to RM5.22 billion. Proceeds from the respective issuances will be used to fund the purchases of mortgage loans and Islamic home financing from the domestic financial system.

All the above papers, which will be redeemed at their full nominal value upon maturity, are unsecured obligations of the Company, ranking pari passu among themselves and with all other existing unsecured obligations of the Company. They will be listed and tradable under the Scripless Securities Trading System of Bursa Malaysia.

Cagamas’ corporate bonds and Sukuk continue to be assigned the highest ratings of AAA and P1 by RAM Rating Services Berhad and AAA/AAAIS and MARC-1/MARC-1IS by Malaysian Rating Corporation Berhad, denoting its strong credit quality.  Cagamas is also well regarded internationally and has been assigned local and foreign currency long-term issuer ratings of A3 by Moody’s Investors Service Inc. that are in line with Malaysian sovereign ratings.

The Cagamas model is well regarded by the World Bank as the most successful secondary mortgage liquidity facility. Cagamas is the second largest issuer of debt instruments after the Government of Malaysia and the largest issuer of AAA corporate bonds and Sukuk in the market. Since incorporation in 1986, Cagamas has cumulatively issued circa RM317.6 billion worth of corporate bonds and Sukuk.


Albaraka Turk Raises TL845million Through Five Sukuk Ijara Offerings in August 2020

Istanbul – Leading Turkish Participation bank, Albaraka Turk Katilim Bankasi, a subsidiary of the Bahrain-incorporated but Saudi-owned Albaraka Banking Group, raised TL845 million through five Ijara (Lease Certificate) Sukuk issuances in August 2020. The issuances comprised a TL35 million issuance on 11 August 2020 with a tenor of 196 days maturing on 23 February 2021; a TL150 million issuance on 11 August 2020 with a tenor of 91 days maturing on 10 November 2020; a TL250 million issuance on 11 August 2020 with a tenor of 77 days maturing on 27 October 2020; a TL100 million issuance on 6 August 2020 with a tenor of 45 days maturing on 27 September 2020; and a TL310 million issuance on 4 August 2020 with a tenor of 94 days maturing on 6 November 2020, respectively.

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.


Sustainable Investor Demand Marks IILM’s Auction Totaling US$1.06bn of Short-term Sukuk in August 2020

Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM) successfully conducted an auction on 11 August 2020 for a total issuance of US$1.06 billion short-term A-1 rated Sukuk in three series of 1-month, 3-month and 7-month tenor, respectively.

The three series have been priced by the market as follows;

  1. US$400 million of 1- month tenor certificates at 0.33%;
  2. US$460 million of 3-month tenor certificates at 0.45%; and
  3. US$200 million of 7-month tenor certificates at 0.58%, respectively.

The final profit rates, said the Corporation, “lie within the indicative pricing guidance across all the tenors issued, including the inaugural 7-month tenor issued. This demonstrates the sound and continuing interest from Primary Dealers and investors, following the upsize of the asset portfolio that reached the full capacity of the US$3 billion programme size earlier in late July.”

The tender resulted in significant demand from Middle Eastern, Asian and African investors, with an orderbook that closed in excess of US$1.72 billion, representing an average oversubscription rate of 1.62 times.

With frequent monthly issuances throughout the year, the IILM has achieved a total cumulative issuance amount of US$7.5 billion year-to-date, which represents around 30% of the US$-denominated Sukuk year-to-date globally. The IILM will continue to issue its Sukuk regularly to meet the market demand and liquidity needs of institutions offering Islamic financial services. The IILM Short-term Sukuk programme is rated “A-1” by S&P.

According to the IILM, the primary dealers that participated in the two 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. The allocation was dominated by GCC-based institutions.

IsDB Co-finances Landmark US$585m PPP Road Project Section in Kazakhstan Linking Western China – Western Europe Highway

Jeddah – The Islamic Development Bank (IsDB) together with other multilateral co-financiers participated in providing joint funding of US$585 million to BAKAD Investment & Operation Limited Liability Partnership, a project company set up to develop and operate a 66km Ring Road north of Almaty City in Kazakhstan on a PPP basis.

The Financial Close for the project was reached on 6 August 2020 in the Kazakh capital Nur Sultan. This is the first PPP project in the country. BAKAD has a 20-year concession awarded by Kazakhstan to a joint consortium of Turkish and Korean companies for financing, construction, operation, and maintenance of the project.

The ring road will have four lanes in the first and the last sections with a length of 9km and 6 lanes in all other sections with a total length of 57km. Additionally, it will include 21 bridges, 19 viaducts and other elevated structures. The is a landmark project which aims to reduce congestion in Almaty and to create a by-pass for commercial vehicles following the “Western China – Western Europe” transnational highway, where traffic is expected to grow with the Chinese initiative of “One-Belt One-Road”.

According to the IsDB, the project will play a critical role in the regional integration of central Asian economies and will relieve traffic congestion in Almaty and reduce travel times along with number of traffic accidents.

The BAKAD consortium consists of Alsim Alarko and Makyol Insaat from Turkey and SK Engineering & Construction (SK) and Korean Expressway Corporation (KEC) from South Korea.

IsDB will provide a US$100 million Shariah compliant Installment Sale financing facility to support the project. Noman Siddiqui, Head of PPP Division at IsDB, stressed that “the negotiations to conclude the financing for this high profile project took enormous efforts from the joint teams of the Senior Lenders, and their Legal and Technical advisors, and IsDB is extremely pleased to have successfully achieved the financial close for this high profile PPP concession.”

According to Himmatilla Boriev, Portfolio Manager at IsDB for this transaction, “the project is the first of its kind in the CIS and will serve as an excellent benchmark for international investors to exploit PPP models for infrastructure projects in the region in the near future”. Financial Close for the project was achieved despite the limitations caused by the current COVID19 Pandemic, which proved the strong support and determination of the Senior Lenders and Project Sponsors, he added.

Indonesian Government Raises IDR94.14 trillion in Four Rupiah-denominated Sukuk Issuances in August 2020

Jakarta – The Government of Indonesia continues to consolidate its role as one of the most proactive repeat issuers of sovereign domestic Sukuk in the market with four issuances in August 2020 raising a total IDR94.1352 trillion (US$6.3 bn) in the process. Two of the issuances were done through the auction system of Bank of Indonesia and the remaining two were distributed through a private placement exercise.

The Department of Islamic Financing at the Directorate General of Budget Financing and Risk Management, Ministry of Finance of Indonesia, is a prolific issuer of Sukuk on behalf of the Government of Indonesia.

The issuances comprised two transactions of Sukuk Negara distributed through private placement. The first one was on 14 August 2020 totaling IDR2 trillion which has a tenor of 23 years maturing on 15 April 2043 and priced at a fixed coupon rate of 6.75% per annum and a yield of 7.42%. The second transaction of Sukuk Negara on 27 August 2020 totaled IDR3 trillion and has a tenor of 10 years maturing in August 2030 and priced at a fixed coupon rate of 6.37% per annum and a yield of 6.37%.

The Directorate General of Budget Financing & Risk Management also held two auctions of Sovereign Shariah Securities (SSS) through the auction system of Bank of Indonesia. The first one was held on 4 August which raised IDR39.761 trillion comprising four tranches of 1,3, 4 and 26 years and priced at a coupon rate at discount, 6.5%, 6.25% and 7.75% respectively.

The second auction of SSS was held on 18 August which raised IDR49.3742 trillion comprising five tranches of 1,3, 4, 13 and 26 years and priced at a coupon rate at discount, 6.5%, 6.25%, 8.375% and 7.75% respectively.

Arab National Bank Fully Redeems SAR2bn Tier 2 Sukuk on Scheduled Call Date Five Years After Issuance

Jeddah – Arab National Bank (ANB) of Saudi Arabia has decided to redeem its SAR2 billion Tier 2 Sukuk on 7th October 2020, in full, at face on the scheduled call date five years after issuance.

The Sukuk was offered through private placement on 7th October 2015 for an aggregate value of SAR2 billion with an original maturity of 10 years due on 7 October 2025, qualifying as Tier 2 subordinated debt in accordance with the Basel III framework. In accordance with the Sukuk’s terms and conditions, ANB, as issuer, can call the Sukuk on the periodic distribution date that falls on or nearest to 7 October 2020. Regulatory approval was obtained in this regard.

The redemption amount together with any periodic distribution amount (profit for the current periodic distribution period ending 7 October 2020) will be transferred by ANB to the Sukukholders’ accounts on 7 October 2020 based on their respective Sukuk holdings as of 28 September 2020 (start of the Sukuk trading suspension period).

State Bank of Pakistan Issues Directive for Banks to Enhance Digital Banking and Payment Services to Customers and to Increase Vigilance Against Online Scams and Cyber Fraud

Karachi – In the wake of the COVID-19 pandemic, the State Bank of Pakistan (SBP) after consultation with stakeholders has further instructed banks in August 2020 to take specific measures to provide their services seamlessly taking due care of reducing the risk exposure amid coronavirus.

The objective of these measures is to reduce the need for visiting bank branches or the ATMs and to promote use of Digital Payment Services such as internet banking, mobile phone banking and so on.

SBP has instructed banks to waive all charges on fund transfers through online banking channels such as Inter Bank Fund Transfer (IBFT) and SBP’s Real Time Gross Settlement System for customers. Thus, people can transfer money through mobile phones or internet banking avoiding the need to visit a bank branch or an ATM without incurring any cost. They will also not incur any cost in case of using ATMs or visiting bank branches for transferring large amounts and can avoid the use of cash. “Banks have been advised to facilitate their customers in using online banking while taking all necessary precautions to ensure the safety and security of customer’s funds. Further, they will also ensure that call centres/helplines are available 24/7 for instant customer support,” said the SBP in a directive.

Banks are also now required to facilitate educated-related payments and fees through internet banking or mobile devices and to run awareness campaigns through different channels to educate customers to use internet banking or mobile phones, limit use of currency notes and restrict branch visits.

Anticipating any frauds in the wake of digital transactions, the SBP has similarly advised financial institutions to increase vigilance on digital channels and increase monitoring on cyber threats.

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