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UK:
The UK government has declared that it will auction a GBP200 million
(US$336.36 million) Sukuk “in the coming weeks”, subject to market
conditions. Having first announced its intention last October, it has
been suggested that the issuance will be offered before the month of
Ramadan, which begins the end of this month. The global Sukuk issuance
is part of the government’s long-term economic plan to establish the UK
as the center of the global financial system.
The
sovereign paper will carry a maturity of five years and is structured
based on the principle of Ijarah. The Sukuk will be underpinned by
rental income from three central government office properties, which
will remain in government ownership during the lifetime of the
facility.
Speaking
exclusively to Islamic Finance news,
Richard Thomas, the senior advisor to the board and chief
representative of Gatehouse Bank Malaysia, said: “Excellent
progress - the issue should conform to all requirements to
qualify as high quality liquid assets and put that issue to bed finally
for the UK’s standalone Islamic banks.”
Earlier
in April, Gatehouse announced that it intends to purchase approximately
GBP30-40 million (US$50.45-67.27 million) of the Islamic debt. The bank
predicted that bids for the UK’s maiden Sukuk issue would be in the
range of billions of pounds. The Sukuk would assist the UK’s 26 Shariah
compliant financial institutions in managing their short-term liquidity
needs. As a means of lowering concentration risk in the Islamic
financial sector, the Bank of England has also been analyzing ways to
boost the number of Shariah compliant assets which can be used by
Islamic financial institutions as liquidity buffers.
Several
other non-Islamic countries have announced similar intentions to issue
sovereign Sukuk including: South Africa, Luxembourg and Hong Kong.
Should this issuance materialize prior to Ramadan, the UK will become
the first country outside the Islamic world to issue a sovereign
Islamic debt and the deal will be marked as the largest issuance of
sterling Sukuk to date. A spur in volume of non-Islamic sovereign Sukuk
issuances could be a game-changer for the industry. The key driver
behind issuance from non-Islamic sovereigns is clearly to stimulate the
market, rather than to raise funds (see IFN Vol. 10 Iss. 48).
Together
with HSBC, four other banks have been mandated as joint lead managers
namely: Barwa Bank, CIMB, National Bank of Abu Dhabi and Standard
Chartered. Linklaters acts as the legal advisors for the deal.
For
updates on the proposed Sukuk issuances by the UK, Luxembourg, Hong
Kong and South Africa, tune in to our weekly IFN Sukuk Race report and
let us know who you think will be the first non-Muslim country to issue
a sovereign Sukuk by voting in our weekly Sovereign Race poll!
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