AK BARS Bank concludes US$100 million Murabahah financing facility for Tatarstan - IFN

AK BARS Bank concludes US$100 million Murabahah financing facility for Tatarstan

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RUSSIA: AK BARS Bank (ABB), a financial institution based in the Russian-controlled Republic of Tatarstan, has successfully procured a one-year Murabahah financing facility worth US$100 million. Proceeds from the facility will be utilized to fund Shariah compliant assets and investment projects across Tatarstan and the regional states in which ABB operates. The deal represents the bank's sophomore Islamic financing venture, following its debut Shariah compliant transaction in 2011 with a US$60 million syndicated Murabahah financing facility. In an exclusive interview with Islamic Finance news, Robert Minnegaliev, the chairman of the management board of ABB, said: “We place a high value on the support of a vast number of banks and [on the] increasing interest of GCC countries to Russia. We intend to strengthen relationships with our partners from the Middle East and to develop new business areas. ABB was the first Russian bank to enter the alternative funding market with the aim of continuing its development in Islamic finance in the long run.” Bearing testament to the bank’s reputation as a reliable borrower, the transaction stimulated high market interest resulting in significant oversubscription and the participation of 11 banks. This is in comparison to just four for the 2011 deal – all of whom, it should be noted, subsequently returned to participate in the most recent transaction. The mandated lead arrangers and bookrunners for the deal were Citi, Commerzbank and Emirates NBD Capital. Mandated lead arrangers were Amsterdam Trade Bank, Credit Europe Bank, the ICD and London Forfaiting Company; while the co-arrangers were AKA Ausfuhrkredit, Banque de Commerce et de Placements, JPMorgan Chase and Ziraat Bankasi, Turkey's second-largest bank. Apart from raising funds, the transaction is also aimed at creating further awareness in GCC and the Middle East regarding the Islamic finance appetite in Russia and particularly in Tatarstan, which has a Muslim population of around 55%. As of the 1st October 2013, ABB held the position of its biggest banking institution: representing 38% of total assets and 50% of total equity capital in the banking sector of Tatarstan. The bank’s long-term local and foreign currency deposit ratings were recently upgraded to ‘B1’ from ‘B2’, while its standalone financial strength rating was also elevated to ‘E+’ from ‘E’ by Moody’s, with a stable outlook. Fitch also affirmed the bank’s long term issuer default rating at ‘BB-’, with a stable outlook. For further information on the transaction and an analysis of the opportunities for Islamic finance in the wider Russian and Central Asian region, please refer to the cover story in this week's IFN Newsletter (Vol 11, Issue 4: 'A new frontier: Former Soviet Union forges ahead with Islamic finance').