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Monday, 10 August 2015

Saudi's Othaim Malls targets up to 1 bln riyal debut sukuk issue

Aug 10 Saudi Arabia's Al Othaim Real Estate and Investment Co, owner of five shopping malls in the kingdom, is marketing a five-year debut sukuk issue which could raise up to 1 billion riyals ($267 million) for the company, four sources aware of the matter said.
The firm, also known as Othaim Malls, is part of Al Othaim Holding, a family-owned conglomerate which includes listed food retailer Abdullah Al Othaim Markets Co.
Othaim Malls launched the transaction last week, with pricing earmarked at between 165 basis points and 175 basis points over the six-month Saudi interbank offered rate , according to the banking sources who spoke on condition of anonymity as the information isn't public.
A company source, who declined to be named, confirmed the sukuk was being marketed and said part of the proceeds would be used to fund its expansion plans.
Othaim Malls is building five malls, of which three are likely to be completed by end of this year, with the rest finalised by the end of 2016, as well as 16 entertainment centres, the company source added.
Two of the sources said applications from investors wanting to participate in the deal, which is secured against the firm's mall in Al Hofuf in the east of the kingdom, needed to be submitted by Aug. 20.

The deal comes after sources told Reuters in June that Othaim Malls was looking to complete a transaction after the summer, having revived plans which had stalled the previous year.
(Reuters / 10 August 2015)
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UAE needs to boost Islamic finance sector’s stability with more regulations, IMF says

The UAE needs to introduce more regulation to increase the stability of its Islamic finance industry, according to the IMF’s annual report on the country.
It must “tailor [its] regulatory and supervisory frameworks to adequately address Islamic banks’ specific risks”, said the IMF. That means introducing new rules to govern profit-sharing investment accounts and Sharia governance.
The UAE must also continue to develop new Sharia-compliant liquidity management tools for banks, said the IMF.
Islamic assets presently account for 17 per cent of assets and 19 per cent of bank deposits in the UAE, according to the IMF.
The UAE’s Central Bank needs to act as a lender of last resort to the country’s Sharia-compliant lenders, said Jaseem Ahmed, the secretary general of the Islamic Financial Services Board, an independent international institution.
The Islamic finance sector was “systemically important” in the UAE, Qatar, Saudi Arabia, Kuwait and Yemen because Sharia-compliant assets account for more than 15 per cent of total banking system assets in these countries. he said.
The UAE government plans to introduce a unified Sharia authority to act as the country’s ultimate arbiter of jurisprudence on Islamic finance.
The authority will be set up by the end of September, according to Khalid Al Janahi, an adviser to the government-backed Dubai Islamic Economy Development Centre. The centre oversees the emirate’s efforts to transform itself into a centre for Sharia-compliant finance, goods and services.
The next step is for the UAE government to address legal enforcement of contracts governing Sharia-compliant financial products, according to Sayd Farook, who also advises the Dubai Islamic Economy Development Centre, and a former head of Islamic capital markets at Thomson Reuters.
“Who is the ultimate arbiter of the Islamic interpretation of contracts? When parties go to court, who arbitrates whether a contract is Sharia-compliant or not?” said Mr Farook.
“Islamic jurisprudence is an art, and the interpretations are not always uniform,” he said.
When the property developer Nakheel almost defaulted on its US$4 billion sukuk in 2009 when it was owned by Dubai World, the legal difficulties the crisis created were major, said Omar Salah, a senior associate at the De Brauw Blackstone Westbroek law firm, in a paper published when he was a doctoral candidate at Tilburg Law School.
Nakheel had sold assets to a special purpose vehicle, but under Dubai law, creditors had no rights to the assets held by it. The crisis was ultimately resolved, but the lesson stood that the UAE’s legal system did not address key areas of contract law regarding Islamic finance, according to Mr Salah’s paper.
Clarity in dispute resolution over Sharia-compliant assets “is an area where all countries are suffering”, Mr Farook said.
(The National Business / 08 August 2015)
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