GCC sees strong corporate sukuk pipeline in 2014
Dubai, November 29, 2013
Kuwait-based Rasameel Structured Finance Company expects a flurry of Islamic financing activity in the Gulf next year, in particular from corporations looking to tap the market for Islamic bonds, its chief executive said.
The sukuk market in the Gulf is dominated by large sovereign and quasi-sovereign issuers, but some local investment firms are doing deals which are often overlooked by larger investment banks.
"There is an increase in activity, Dubai in particular and in the region in general, so we see a recovery coming up and I would expect to see more corporates come to market," said Issam Al-Tawari, Rasameel's chairman and managing director.
"We want to provide solutions that will accommodate certain requirements from clients that are not necessarily covered by the banking sector."
The firm is working on corporate deals mainly in Kuwait and Dubai, including a sukuk for a healthcare company in the United Arab Emirates that will fund the completion of hospitals and a research center, Tawari said in an interview.
The sukuk would be listed and issued around the second quarter of 2014, a $250 to $300 million deal with a tenor of at least five years, he added. He did not name the issuer.
"We are also looking to do a sukuk issue out of the UAE for a company that owns schools to finance tuition."
Rasameel is working on a sukuk from Kuwaiti conglomerate Alghanim Industries, worth $50 million, which is expected to close early next year. "We do this in two phases; we do a warehousing line and then six months later we do a sukuk on the back of it."
A similar deal is being developed with an IT services firm in Kuwait, which Rasameel hopes to structure in Dubai, a $90 million sukuk with a tenor of 18 to 24 months, he said.
While corporates increasingly test the market, there is still a crucial role for sovereign issuance in addressing a lack of longer tenors to help in price discovery, Tawari said.
"What is more important is to see government issues at varying maturities so that we can have a clear yield curve of local currencies. That is not happening yet.
"Basically we are missing the 10-, 15- and 20-year bonds because that will set the pace for longer maturity sukuk."
The firm is also advising banks on capital restructurings by repackaging assets on their balance sheets; one of the banks is based in the UAE.-Reuters