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Sunday, 1 March 2015

Sukuk Set to Take Off With Garuda Sale

Indonesia’s state-owned airline has planned the nation’s first corporate global sukuk sale to tap dollar wealth in the Middle East and cut funding costs.
Garuda Indonesia, which uses the national symbol of a mythical eagle as its insignia, may issue $500 million of US currency Shariah-compliant debt in April, widening its investor base, finance director Askhara Danadiputra said in an interview in Jakarta on Tuesday.
Emerging-market dollar bonds yield an average 6 percent, compared with 7.1 percent for rupiah- denominated notes, JPMorgan Chase indexes show.
Garuda will set a precedent for Indonesian companies after the government sold its first international Islamic bonds in 2009. The investment-grade offering may attract buyers in the Gulf Cooperation Council amid the worst start to a year for global sukuk issuance since 2010.
The oil-rich region accounted for 32 percent of the $46 billion total sales last year versus 49 percent in 2013, reflecting declining crude prices that have benefited airlines.
“The successful outcome of Garuda’s trailblazing effort will hopefully be the catalyst to spur other Indonesian blue chips to ride the momentum,” Alhami Abdan, the Kuala Lumpur- based head of international finance and capital markets at OCBC Al-Amin Bank, said by e-mail on Wednesday.
Garuda’s Danadiputra said the Islamic bond will help diversify the airline’s funding base and will be used for refinancing. The company has $187.6 million of floating-rate notes coming due in 2016 after the debt was restructured in 2010, data compiled by Bloomberg show. No pricing is available.
The airline, which is ranked BBB+ by Fitch Ratings under its national long-term ratings, plans to reduce debt to about $780 million in two years, from $980 million currently, he said.
The company signed a $400 million Islamic loan facility with National Bank of Abu Dhabi and Dubai Islamic Bank on Feb. 18 to bridge financing needs before the dollar sukuk offer, it said in a statement to the stock exchange. The two banks will be among five lenders hired to arrange the debt sale, Danadiputra said.
Garuda joins other airlines such as Malaysian Airlines, Emirates Airline, Dubai Aviation and AirAsia in selling sukuk to tap Islamic banking assets that Ernst & Young forecasts will double to $3.4 trillion by 2018.
The Garuda sale will help add momentum to global sukuk issuance that’s waned to just $1.8 billion so far in 2015, from $6 billion a year earlier, data compiled by Bloomberg show.
It still could be a bumper year for Islamic dollar notes, as Malaysia’s Petroliam Nasional plans as much as $7 billion, the biggest ever foreign currency Shariah-compliant bond.
Emirates is also said to be planning a $1 billion offering.
Sukuk are ideal for airlines because the securities are backed by an underlying asset to comply with Islam’s ban on interest.
They tend to be more expensive to issue than conventional counterparts because of the fees paid to scholars and the complexity of their structure.

“The market has become more comfortable with sukuk due to regular global sales,” Ezra Nazula, who manages $2 billion as Jakarta-based head of fixed income at Manulife Asset Management, said by phone on Tuesday.
“But market growth comes down to potential issuers finding it difficult to structure the securities and finding assets to back the notes.”
Indonesia’s local-currency Islamic debt market has been hindered by a lack of clarity on laws that avoid double taxation on both capital gains and the assets backing the bonds. Each potential offering is considered on a case-by-case basis by regulators.
Total corporate sukuk sales amounted to Rp 755 billion ($59 million) last year, a fraction of Malaysia’s $17 billion, official data show.
In 2013, issuance was Rp 2.2 trillion and Rp 1.9 trillion the previous year. It was as little as Rp 100 billion in 2011.
The lack of supply is holding back growth in the Shariah-compliant finance industry as Islamic banking assets rose to a record Rp 272 trillion, according to figures from the Financial Services Authority.
Indonesia is planning to sell a sovereign dollar sukuk in the first half, the fifth straight annual sale, making the country the world’s most regular borrower through such debt.
“The government’s yearly offer paved the way for Garuda to reach Middle Eastern investors, who have become more familiar with Indonesia,” Yudistira Slamet, head of fixed-income research at state-owned Danareksa Sekuritas, said by phone from Jakarta on Tuesday.

“A successful sale could prompt other companies to follow once Garuda sets the benchmark for other corporate dollar sukuk.”

(Jakarta Globe / 26 February 2015)
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National Bank of Oman's Muzn Islamic Banking opens new branch in Sohar

Muscat: National Bank of Oman (NBO) opened a new Muzn Islamic Banking outlet, in Sohar. The Muzn Sohar Branch, will be operating Sunday to Thursdays and the opening hours are 8:00am to 2:00pm. The branch will serve all Islamic banking customers in Sohar and the surrounding areas, providing a complete range of Sharia compliant products and services.

The branch was inaugurated under the auspices of the Wali of Sohar, Sheikh Ali Bin Ahmed bin Mishari Al Shamsi and attended by senior officials from the bank. The branch will have experienced staff and robust systems in place to offer services to institutional, corporate and retail customers.

Ahmed Al Musalmi, Chief Executive Officer of NBO, said: "Muzn Islamic Banking continues to be a key growth area for the Bank and, by providing an all-encompassing range of Sharia compliant banking services to deliver financial solutions to a growing customer base."

"Since we launched the first Muzn Islamic Banking window in 2013, the growth and development of our window has been tremendous. We will continue to launch dedicated Islamic banking branches in strategic locations in order to expand Muzn's presence across the Sultanate in the near future."

National Bank of Oman was the first bank to introduce an Islamic Banking window in the Sultanate in January 2013, and aims to open more branches across the Sultanate throughout 2015 to serve customers who seek Sharia banking solutions. 

Muzn Islamic Banking's range of products caters to institutional, corporate and retail customers and includes: Murabaha Auto Finance; Ijara Home Finance; Sale and Lease Back Finance; Muzn Current Account (Qard Hassan); Muzn Savings Account (Mudaraba); Wakala Investment; Flexi Wakala Account; Murabaha Working Capital Finance; Ijara Muntahia Bittamleek Term Finance and Trade Finance.

(Times Of Oman / 28 February 2015)
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