US: After
foregoing its Sukuk plans three years ago, Goldman Sachs has finally
issued its much talked-about Islamic debt, the first for the US
investment bank, and any conventional US bank for that matter. Priced at
90bps over midswaps (tighter than the initial guidance of 95bps), the
US$500 million program was three times oversubscribed attracting some
US$1.5 billion in orders.
Carrying a profit rate of 2.84%, the five-year Sukuk program has notable
differences from the bank’s previously planned facility – suggesting that
Goldman Sachs has taken from its previous failure valuable lessons to
ensure the success of its new program. Most noteworthy is the change in
structure from the controversial Murabahah to the more acceptable
Wakalah. The program structure dictates 51% of the issued amount to be
assumed by the bank’s subsidiary J Aron & Co based on a Wakalah
contract while the remaining 49% will be based on Murabahah with SPV Jany
Sukuk.
Goldman Sachs also chose to list the issue on the Luxembourg Stock
Exchange over the Irish Stock Exchange – a move which is likely motivated
by Luxembourg’s greater commitment and involvement in Islamic finance
which enhance its appeal to Shariah-inclined investors. Apart from
itself, the bank’s team of arrangers for the transaction comprised of
familiar names in the industry including: Abu Dhabi Islamic Bank, Shariah
compliant QInvest, Saudi Arabia’s NCB Capital, Emirates NBD and National
Bank of Abu Dhabi.
The Sukuk is indeed welcomed by the industry as a testament to the
growing internationalization of Shariah compliant financial instruments
as related to IFN by Joshua Brockwell, the investment communications
director of US-based Azzad Asset Management: “The Goldman Sukuk
illustrates the growth of Islamic finance beyond the traditional markets
of the Middle East and Southeast Asia.” However, a bigger question looms:
With the US bank flush with liquidity and in no need for more capital,
could Goldman Sachs’ return to the Islamic debt market indicate a return
to the Middle East or a new strategy focusing on Islamic finance? The
bank did not return IFN’s request for comments.
Regardless of the bank’s intention, its entry into the Sukuk market
further cements the position of the Islamic finance industry in the
global stage as demonstrated by strong interest from various
international markets including Sukuk debutants Hong Kong, the UK,
Sharjah and prospective issuers such as South Africa and Luxembourg.
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