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US: US-based bank
Goldman Sachs, is reportedly preparing to issue a benchmark-sized, US
dollar-denominated Sukuk, and has selected Abu Dhabi Islamic Bank,
Emirates NBD, National Bank of Abu Dhabi and NCB Capital, along with
itself to arrange investor meetings in the Middle East.
The bank has not replied to requests for comments, but the reports are
the latest entry in the efforts of Goldman Sachs to issue a debut Sukuk.
In October 2011 the US bank announced plans for a US dollar Sukuk that
was to be issued via a Cayman Islands SPV and listed on the Irish Stock
Exchange, with Shariah compliance outsourced to Shariah advisor, Dar
Al-Istithmar. Plans were put on hold however, following concerns from the
industry that the commodity Murabahah structure to be utilized was not
Shariah compliant. Suggestions were made that the funds raised could be
directed to the bank, that the underlying assets to be used for the
issuance could be sold to a third party and that there was no guarantee
that the securities would trade at par.
According to S&P, which has assigned an ‘A-’ rating to the benchmark-sized
issuance, the Wakalah structure will be used. SPV JANY Sukuk will enter a
Murabahah agreement for 49% of the issued amount and a Wakalah agreement
for the remaining 51% with Goldman Sachs subsidiary, J Aron & Co.
Fitch Ratings has stated that it expects to assign a long-term debt
rating of ‘A’ to the Goldman Sachs Group’s JANY Sukuk Company-guaranteed
trust certificate issuance program, based on Goldman’s unconditional and
irrevocable guarantee of the payment obligations of J Aron under the Murabahah
contract which will reportedly rank ‘pari passu’ with the bank’s other
unsecured and unsubordinated indebtedness.
J Aron & Co is considered to be one of the pioneers of commodity
Murabahah in the London market in the 1980s and 1990s. Speaking exclusively
to Islamic Finance news,
David Loundy, the chairman of the board of directors of US-based Devon
Bank, which offers Islamic finance options elaborates: "Anything
involving this kind of a first for a big investment bank, or from anyone
at this kind of size will gain attention. I think the willingness to
issue Sukuk is there, but the motivation may not be if a prospective
issuer’s capital needs are otherwise easily met. Where Sukuk in the US
really have potential, is to generate investments in particular projects
that show creativity—if investors can be found that want such
investments."
The move by Goldman Sachs reflects the growing demand in the market for
Sukuk, given the current low average yields and use of the structure by
governments such as those of Brunei, Indonesia, Malaysia, Senegal, and
the UK. Despite a perceived lack of attraction toward Islamic finance in
the US, Goldman Sachs has been one of the country’s banks that has
displayed a continued interest in the industry; most recently participating
as a financial advisor in the attempted sale of a portion of troubled
Turkish participation Bank Asya to Qatar Islamic Bank and being selected
as one of the mandated coordinators and bookrunners for the US$400
million issuance by Dar Al Arkan Real Estate Development in May this
year.
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