Sharjah Islamic raises $500m in sukuk sale

  • Share via facebook
  • Tweet this
  • Bookmark and Share

Sharjah Islamic Bank (SIB) sold a $500 million five-year Islamic bond at tighter pricing than initially indicated due to strong demand for sharia-compliant debt from the Gulf Arab region.

The sukuk, maturing in 2018, priced at par with a profit rate of 2.95 percent, at the lower end of the final guidance range of between 2.95 percent and 3 percent.

Islamic banks have stepped up sales of sharia-compliant debt to meet their liquidity requirements and also to increase their capital reserves.

Demand for the sukuk was high, and the order book was over $2 billion when the official guidance was released.

SIB, rated BBB+ by Standard & Poor's and Fitch Ratings, is 31-percent owned by the government of Sharjah, the third-largest emirate in the United Arab Emirates. Kuwait Finance House (KFH) holds a 20 percent stake in the Islamic lender.

Its existing sukuk, a $400 million 4.715 percent issue maturing in 2016, was bid at 106.9 cents on the dollar on Tuesday afternoon, according to Thomson Reuters data, to yield 2.4 percent.

One trader said the new issue offered a negligible premium for a two-year extended maturity, and that this may lead to a weakening in secondary markets.

In recent bond and sukuk issues in the region, heavy bids caused pricing to tighten dramatically in the primary market, setting the bonds up to fall in the secondary market when it becomes clear that underlying demand for them at the final pricing is not as great as the order books suggested.

Proceeds from the sukuk are expected to be transferred to the bank through a special purpose vehicle, according to a company prospectus.

Abu Dhabi's Al Hilal Bank, HSBC Holdings, Kuwait's Liquidity Management House, a unit of KFH and Standard Chartered Plc are mandated lead arrangers on the sukuk.

Related:

Market Performance

Sharjah Islamic Bank
1.86
0.05 2.76 (%)
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
The flood gates open

The flood gates open

Turkey’s new fondness for sukuk has been met with increasing...

"Sleeping giant" debt market awakes in Saudi Arabia

After years in which the growth of Saudi Arabia's bond market...

Gulf bond issuers see opportunity in Malaysia

Gulf bond issuers see opportunity in Malaysia

Gulf looks to tap Malaysian investors with ringgit issues; country...

Most Popular
Most Discussed