Dubai Luxury Real Estate Developer DAMAC Successfully Closes its Latest Sukuk Issuance in the International Market with a US$200 million 2.25-year Senior Unsecured Sukuk Offering in February 2023
Dubai – DAMAC Real Estate Development Limited, the Dubai-based luxury apartment and real estate developer, successfully priced its latest Sukuk offering – a 2.25-Year US$200 million Senior Unsecured Sukuk – on 15 February 2023.
The transaction was arranged by Emirates NBD, one of the largest banking groups in the MENAT (Middle East, North Africa and Turkey) region, and marks the Bank’s third private placement arranged for DAMAC to date.
Emirates NBD was the sole Global Coordinator, Placement Agent and Settlement Agent, and led the unlisted transaction from origination, structuring, documentation, marketing to settlement.
Hussain Sajwani, Founder and Chairman of DAMAC explained: “Over the years, we have enjoyed a very strong relationship with Emirates NBD. I am happy to see this placement has seen great interest from regional and
international investors. The Sukuk proceeds primarily will be used for repayment of existing debt in addition to supporting future growth of our company.”
The Sukuk, stressed DAMAC, saw significant demand, reflecting the company’s robust credit fundamentals and the confidence regional investors have in the company following its recent reorganisation and the positive credit ratings throughout 2022.
Due to the robust demand and the Group’s strong distribution capabilities, the transaction size was increased to US$200 million from US$150 million. The Sukuk was priced at a profit rate of 7.5% per annum and matures on 7 May 2025.
Ahmed Al Qassim, Group Head of Wholesale Banking at Emirates NBD commented: “We are delighted to have arranged a third private placement for DAMAC, a testimony to the strength of our relationships with our clients and our access to a deep network of regional investors. Our investor pool exceeds 15 from across this region, and beyond. Our ability to single-handedly lead the transaction from origination to settlement also reflects the bank’s ability to tailor bespoke solutions for the complex financing requirements for our clients.”
DAMAC Real Estate Development in December 2022 reported net profit of AED135.6 million (US$36.9 million) for the three-month period ended 30 September 2022, a turnaround from a loss of AED 82.4 million for the same period in the previous year.
ITFC Pens US$1.5bn Funding Programme with Egypt for FY 2023
Cairo – The International Islamic Trade Finance Corporation (ITFC), the trade fund of the IsDB Group, signed a US$1.5 billion annual funding programme agreement with the Egyptian Government for the year 2023 on 23 January. The funding comes under the 5-year Framework Agreement signed between the two sides worth US$6 billion.
The annual work programme of the ITFC in Egypt for 2023 incorporates several activities, including trade financing in favour of the Egyptian General Petroleum Corporation worth US$ 800 million and the General Authority for Supply Commodities worth US$ 700 million.
ITFC will also seek to provide lines of financing for local Egyptian banks, including Banque Misr and the National Bank of Egypt, to support small and medium enterprises. ITFC will also develop trade development interventions, providing integrated trade solutions in Egypt through various programmes with its international partners such as the Arab-Africa Trade Bridges (AATB) Programme to help integrate Egyptian companies into global and regional supply chains to enhance trade relations with African countries, as well as the 2nd Phase of the Aid for Trade Initiative for the Arab States (AFTIAS 2.0) Programme to support Egyptian youth, exporters and owners of small, medium and micro enterprises (MSMEs).
The annual work programme also targets further support for small women-owned businesses in the handicraft sector, fostering dialogue between cotton exporters from Africa and Egypt, and implementing a follow-up plan of the value chains project in the cotton sector in partnership with the United Nations Industrial Development Organization (UNIDO). It also promotes cooperation with the Egyptian General Petroleum Corporation and the General Authority for Supply Commodities in the field of digitizing international trade through digitizing documentary credits and
shipping documents.
According to Eng. Hani Salem Sonbol, CEO ITFC, “ITFC’s work programme for the year 2023 with Egypt affirms the strategic partnership between the ITFC and Egypt since 2008, which totals US$14.52 billion to finance and support energy and food commodities, empower exporters, youth, women, and small and medium enterprises, and facilitate trade.”
In fact, the ITFC, the Micro, Small and Medium Enterprises Development Agency (MSMEDA) and the Foreign Trade Training Center, part of Egypt’s Ministry of Trade and Industry, also at the same time launched STEP 2 training for exporters under the AFTIAS 2.0 initiative to boost the capacities of Egyptian entrepreneurs and incorporate their products and services into the global supply chain.
SAMA Issues Licence to Raqamyah, the Second FinTech Finance Company Specialized in Debt-based Crowdfunding
Riyadh – Further signs of the rapid progress of FinTech in the Saudi banking and finance ecosystem is the licensing of a second FinTech finance company specialized in debt-based crowdfunding in as many months.
In January 2023, the Saudi Central Bank (SAMA) issued a license to Raqamyah, a new FinTech finance company specialized in debt-based crowdfunding. The license was granted to the company after successful testing of its solutions in SAMA’s Regulatory Sandbox; an experimental environment dedicated to innovative financial products and services in Saudi Arabia.
This follows the issuance in December 2022 by SAMA of the first such license to Manafa – a FinTech inance company specialized in debt-based crowdfunding in the Kingdom. Manafa is a closed joint-stock company with a capital of SAR40 million (US$10.66 million).
“This initiative,” explained the central bank, “comes as part of the vital role SAMA plays in strengthening the finance sector, encouraging and enticing innovators and investors who can bring added value to the sector while maintaining full adherence to the supervisory guidelines defined by SAMA. The licensing of FinTech companies contributes towards achieving the objectives of the FinTech Strategy to position the Kingdom among the leading countries in FinTech.
SAMA also reiterated its commitment to support the finance sector, by increasing the efficacy and flexibility of financial transactions, enabling and encouraging innovations in financial services, promoting financial inclusion in the Kingdom and enabling easy and secure access to financial services to all segments of the Saudi society, with the aim of also advancing the Kingdom’s Fintech Strategy.
SAMA meanwhile also issued a license to Mani, a finance debt collection company to provide debt collection service for finance institutions in February 2023. The license was granted to the company after completing all the requirements stipulated in the “Rules of Licensing Finance Support Activities” issued by SAMA.
Saudi Electricity Company (SEC) Raises SAR10bn (US$2.66bn) Through a Syndicated Murabaha Facility from a Consortium of Local Saudi Banks in one of the Largest Riyal Syndications
Riyadh – Saudi Electricity Company (SEC), the Kingdom’s power generation utility, signed one of the largest riyal-denominated Syndicated Murabaha Facilities – a SAR10 billion (US$2.66 billion) transaction with a consortium of nine local banks on 14 February 2023.
A consortium of banks comprising Al Rajhi Banking and Investment Corporation, Banque Saudi Fransi, The Saudi British Bank, The Saudi National Bank, Riyad Bank, Bank Albilad, Bank Al Jazira, QNB Group Qatar National Bank – KSA, and The Saudi Investment Bank, participated in the Syndicated credit facility, which has a tenor of 7 years.
The proceeds from the facility, stressed SEC in a filing with Tadawul (the Saudi Stock Exchange) will be used to finance general corporate purposes including capital expenditure. The company is a frequent user of Islamic finance facilities especially through raising funds through syndicated Murabaha financing and issuance of Sukuk.
SAMA Formally Adopts International Financial Reporting Standard-IFRS 17 for Insurance Contracts and International Financial Reporting Standard-IFRS 9 for Financial Instruments
Riyadh – The Saudi Central Bank (SAMA) has formally adopted the International Financial Reporting Standard-IFRS 17 for Insurance Contracts and International Financial Reporting Standard-IFRS 9 for Financial Instruments by the Saudi insurance sector effective 1 January 2023, in line with the implementation date set by the International Accounting Standards Board (IASB).
SAMA in a statement stressed that it attached “huge importance to a seamless and highly effective adoption of the IFRS 17 in Saudi Arabia, as a member of the G20.” SAMA rolled out a transition plan with four phases in 2018. SAMA stated that the adoption of IFRS 17 contributed to introducing new elements in the insurance industry, improving human and technological resources, enhancing transparency of reporting, and fostering regulator-sector relationship.
SAMA pointed out that it is expected that the effort it exerted together with insurance companies during the last four years will go a long way in enabling the Saudi insurance sector to meet the objectives of Saudi Vision 2030.
IFRS 17 and IFRS 9 will impact the Islamic insurance industry s much as it will the conventional sector. The consensus is that IFRS 17, which came into force on 1 January 2023, for insurance contracts will bring enhanced transparency to financial statements, as well as greater consistency and comparability within and beyond the insurance market.
Under IFRS 17, says Fitch Ratings, Insurers’ profit recognition pattern, as well as the P&L components, are set to change under IFRS 17. The standard requires insurers to present a market-consistent balance sheet measurement of insurance contracts, with recognition of profit over the period that services are provided.
Written premiums, traditionally the first line of a traditional income statement (P&L), will be replaced by a new item, ‘value of the insurance services provided’, and investment components will be excluded from revenue and claims.
According to Stephan Kalb, Senior Director, Insurance at Fitch Ratings, the introduction of IFRS 17 and IFRS 9 “will have limited impact on our ratings, as it does not change the risk structure or the economic profitability of the underlying insurance operations. We do not expect our overall views on capitalisation to change for most insurers after the introduction of IFRS 17. However, reported shareholders’ equity is likely to be affected, both directly and indirectly, by the introduction of IFRS 17.
“IFRS 17’s requirement to value liabilities at market value will bring significant direct impacts to reported equity, in particular with regard to the introduction of the contractual service margin (CSM) and the discounting of cash flows. We believe shareholders’ equity could reduce as a consequence of this, as the profit is recognised more slowly over the duration of the contract. However, we expect to add the CSM to the shareholders’ equity in both its Prism Factor-Based Capital Model (FBM) and in the denominator of capital-based ratios. Therefore, the total impact on capital should be small.”
Kalb expects that most financial performance and earnings ratios currently used will be maintained under IFRS 17, although the parameter values of the ratios could change. “We may therefore need to calibrate a separate set of criteria guidelines for companies switching to IFRS 17. In addition, we expect to adopt a number of new financial performance ratios to enhance our analysis, leveraging the new information that will be available under IFRS 17. We have no particular expectation that the above views could be different for credit and political risk insurance.”
Malaysia’s Mortgage Securitiser Cagamas Continues Issuance Momentum in 2023 with RM120m (US$26.86m) Islamic Medium-Term Notes Offering in February 2023
Kuala Lumpur – Cagamas Berhad, the National Mortgage Corporation of Malaysia, one of the most prolific issuers of Sukuk, continued its issuance momentum into 2023 with the successful pricing of its second issuance of the year in February 2023.
Cagamas Berhad successfully closed the issuance of RM120 million (US$26.86 million) two-year Islamic Medium Term Notes (IMTNs) on 16 February 2023. Proceeds from the issuance will be used to fund the purchase of house financing from the domestic financial system.
Datuk Chung Chee Leong President/ Chief Executive Officer of Cagamas commented: “We are pleased to have concluded another issuance successfully, despite persisting concerns stemming from continued monetary tightening by central banks around the globe in combating inflation and potential global growth slowdown. The issuance reflects resilience in our papers against the upward pressure in the domestic yields, which mirrors global fixed income movements.”
The IMTNs, priced via private placement, were concluded with a spread of 46 basis points above the corresponding Malaysian Government Investment Issue (MGII). The new issuance brings the Company’s aggregate funds raised for the year to RM819 million, added Datuk Chung.
Cagamas started the new year with a multi-tenured Conventional Medium Term Notes (CMTNs) and Islamic Medium Term Notes (IMTNs), amounting to a total of RM3.195 billion (US$750 million) on 5 January 2023.
Cagamas plays a major role in Sukuk origination and continues to be an innovator in the mortgage finance and securitisation market. The Cagamas papers are listed and traded under the Scripless Securities Trading System of Bursa Malaysia.
Cagamas’ corporate bonds and Sukuk continue to be assigned the highest ratings of AAA and P1 by RAM Rating Services Berhad and AAA/AAAIS and MARC-1/MARC-1IS by Malaysian Rating Corporation Berhad, denoting its strong credit quality. Cagamas is also well regarded internationally and has been assigned local and foreign currency long-term issuer ratings of A3 by Moody’s Investors Service Inc. that are in line with Malaysian sovereign ratings.
The Cagamas model is well regarded by the World Bank as the most successful secondary mortgage liquidity facility. Cagamas is the second largest issuer of debt instruments after the Government of Malaysia and the largest issuer of AAA corporate bonds and Sukuk in the market. Since incorporation in 1986, Cagamas has cumulatively issued circa RM366.3 billion worth of corporate bonds and Sukuk.
IILM Continues Consecutive Monthly Auction in February 2023 with a US$920m Reissuance of Short-Term A-1 Rated Sukuk
Kuala Lumpur – The International Islamic Liquidity Management Corporation (IILM), an international organisation that develops and issues short-term Sharia’a-compliant financial instruments, successfully launched its second Sukuk issuance of 2023 on 6 February 2023.
The IILM successfully completed its second auction of the year in February with the reissuance of an aggregate US$920 million short-term Ṣukūk across three different tenors of one, three, and six-month respectively.
In January 2023, the IILM reissued an aggregate US$780 million across three different tenors of one, three, and six-month respectively.
The auction on 6 February 2023 comprised three tranches and was priced as follows:
i) US$300 million of 1-month tenor certificates at a profit rate of 4.6%
ii) US$320 million of 3-month tenor certificates at a profit rate of 4.8%
iii) US$300 million of 6-month tenor certificates at a profit rate of 4.95%.
The Sukuk were issued under the IILM’s US$4 billion short-term Sukuk Issuance Programme. IILM Sukuk are rated “A-1” by S&P Global and “F1” by Fitch Ratings. According to IILM, the auction generated a robust demand from both Primary Dealers and investors with a combined orderbook of US$2 billion, representing an average bid-to-cover ratio of 218%.
Further to today’s reissuance, the IILM has achieved year-to-date cumulative issuances totaling US$1.7 billion through six Ṣukūk series. The IILM will continue to reissue its short-term liquidity instruments monthly as scheduled in its issuance calendar.
The IILM is a regular issuer of short-term Ṣukuk across varying tenors and amounts to cater to the liquidity needs of institutions offering Islamic financial services. Since its inaugural issuance in 2013, the IILM has issued a total of US$90. 2 billion through 201 short-term Ṣukūk issuances ranging from 2-week to 12-month tenor, “reflecting the organisation’s ability to provide high quality Sharia’a compliant instruments and reliable offerings to both Primary Dealers and investors, as well as offering stability to the global Islamic liquidity market.”
The IILM’s short-term Sukuk programme has a current outstanding issuance size amounting to US$3.51 billion. The IILM’s short-term Sukῡk is distributed by a diversified network of 10 primary dealers globally, namely Abu Dhabi Islamic Bank, Al Baraka Turk, Boubyan Bank, CIMB Islamic Bank, Dukhan Bank, First Abu Dhabi Bank, Kuwait Finance House, Maybank Islamic, Qatar Islamic Bank, and Standard Chartered Bank. The IILM short-term Ṣukūk programme is rated “A-1” by S&P and “F1” by Fitch Ratings.
Sharjah’s Arada Developments Follows Up in February 2023 with a Second US$50m Tap Issuance of its Debut US$350m Sukuk in June 2022
Sharjah – Arada Developments, the largest developer in Sharjah, successfully closed a US$50 million tap issuance in February 2023 – the second tap of its US$450 million Sukuk, which was issued in June 2022 and is listed on the London Stock Exchange. The second tap raised US$50 million and brings the total size of the Sukuk to US$500 million.
This is Arada Developments third foray into the Sukuk market in the last nine months. This latest tap as priced at 99 cents on the dollar, with an investor yield of 8.448%.
In October 2022, Arada raised US$100 million in a first tap which received an overwhelming response from the international debt capital market, resulting in an oversubscription with orders exceeding US$185 million. The tap was priced at 99 cents on the dollar, with an investor yield of 8.386%.
The second tap, according to Arada Developments, was executed based on investor feedback and inquiries, following extensive roadshows across the UK and GCC. Mashreq acted as the sole Manager and Bookrunner for the second tap.
Ahmed Alkhoshaibi, Group CEO of Arada, reiterated that the company “was thrilled to have raised US$500 million through the two tap transactions on our inaugural Sukuk. This demonstrates that investors have been following our story since May 2022 and recognise our investor proposition, good governance record, and credit strength.”
The US$350 million 5-year fixed rate RegS Sukuk issuance in June was Arada’s maiden public debt financing offering. The Sukuk certificates, rated BB- by Fitch Ratings and B1 by Moody’s Investor Services, were priced at par with a coupon of 8.125% per annum, inside the initial price guidance area of 8.25% for a spread of 530 basis points over Treasuries.
The proceeds from both taps will be used for general corporate purposes and to support the development of Arada’s existing projects.
Bahrain’s Energy Company nogaland signs US$200m Syndicated Murabaha Facility with Consortium of Local Banks in January 2023
Manama – The Oil and Gas Holding Company B.S.C. (nogaholding), the energy investment and development arm of the Government of Bahrain, signed a US$200 million revolving syndicated Murabaha credit facility with a consortium of banks led by Al Baraka Islamic Bank (AIB) at end January 2023.
Other participants included Bahrain Islamic Bank (BisB), Khaleeji Commercial Bank and, the National Bank of Kuwait (NBK) – Bahrain. No details of the pricing nor the tenor was disclosed.
This Murabaha facility comes at a time as nogaholding prepares to undergo a strategic transformation from a traditional oil and gas holding company to a progressive and responsible energy company.
Mark Thomas, Group Chief Executive Officer of nogaholding, stressed at the facility signing agreement: “As an active contributor and growth catalyst in the local economy, nogaholding will continue engaging with leading financial institutions to accelerate the Kingdom’s energy strategy. Seeking diverse financial solutions for nogaholding will help support the Company’s financial plans and meet our mandates that are in line with the Kingdom’s Economic Vision 2030, and the goals set out by the Crown Prince during COP26.”
According to Hamad Abdulla Al Oqab, CEO of Al Baraka Islamic Bank: “This agreement with the main developer and investor in the Kingdom’s energy sector is one of the largest Sharia’a-compliant renewable credit facilities in the sector. This will grant nogaholding the flexibility in diversifying sustainable financing sources and applying best practices in managing financial assets and liabilities, while continuing its sound approach in managing working capital and enhancing the liquidity position to serve the development projects of the energy sector in the Kingdom.”
Nogaland is an occasional user of lslamic finance facilities. In May 2022, it successfully refinanced its US$1.6 billion Murabaha facility and upsized it to US$2.2 billion. In March 2021, it closed a US$600 million Senior Unsecured Sukuk under its US$3 billion Trust Certificate Issuance Programme.
The offering was launched on 31 March at an initial price guidance of 5.75%-5.875% for the Sukuk. The company initially aimed at issuing a benchmark US$500 million Sukuk, but the offering was upsized to US$600 million due to robust demand for the certificates from a wide range of international investors.
IsDB Board Approves €122.73 million (US$133.59 million) Financing Facility for the Cameroon-Chad Electricity Interconnection Project
Jeddah – The Board of Executive Directors of the Islamic Development Bank (IsDB) at its meeting in February 2023 approved a €122.73 million (US$133.59 million) financing facility for Cameroon towards financing the Cameroon-Chad Electricity Interconnection Project, which is aimed at interconnecting the North and South electricity systems between the two countries, and to enable electricity to be traded between them.
The key output objectives and intended development impact of the Project include:
(i) High Voltage Transmission Lines to increase from 0.00 km in 2023 to 532.00 km in 2028.
(ii) The number of sub-stations to increase from 0.00 in 2023 to 4 (Each 50 MVA) in 2028.
(iii) Electricity transmitted from Southern to Northern Cameroon to increase from a baseline of 0.00 MWh in 2023 to 522,000 MWh in 2028.
(iv) Electricity traded between Cameroon and Chad to increase from 0.00 MWh in 2023 to 438,000 MWh in 2028.