The results are in, and IFN is delighted to announce the final winners of our Deals of the Year (DOTY) 2017, as judged by our independent panel of industry experts. We wish all winners the sincerest congratulations.
The past 12 months have showcased the resilience of the Islamic finance market. Submissions increased by 5% and recovered to the 2015 record level of 425 unique submissions. The pattern of market development continued, and the dominance of Malaysia among submissions continued to erode slowly.
The big three Islamic finance markets are rounded out by the UAE and Saudi Arabia. Oman and Kuwait punched above their weight with innovative new transactions. The course was steady in Bahrain, Indonesia, Pakistan and Turkey. In sub-Saharan Africa, the International Islamic Trade Finance Corporation (ITFC) continued to open new markets while the Islamic Corporation for the Development of the Private Sector (ICD), Banque Misr and Abu Dhabi Islamic Bank-Egypt (ADIB-Egypt) expanded the Egyptian market. Oh, the naughty submissions, some of you were so excited about next year’s deals that you submitted them this year!
Energy is a theme. In 2017, both traditional hydrocarbon transactions featured with the ITFC financing crude shipments to the Maldives, as well as Sukuk issuances by Saudi Aramco and Kuwait’s Equate. Alternative energy figures notably in the 2017 list with the UAE, Egypt and Malaysia featuring prominently.
We are still big on Tawarruq. Deals considered purely commodity Murabahah or Tawarruq were 28% of the submissions.
But this is a misleading number. Almost all of the hybrid submissions involved a Tawarruq feature. As a result, Tawarruq featured in almost 40% of the submissions. Ijarah remains the second-most popular workhorse among the submitted transactions. Musharakah and Mudarabah submissions have increased in the area of corporate finance with new applications in the UAE and Egypt, beyond the common South Asian submissions.
The 2017 submissions brought a wider range of Corporate Finance deals. So often, we focus on Sukuk, but this year the deals included a corporate finance exercise that included tendering for the redemption of Sukuk. Mergers and acquisitions (M&A) and IPO submissions increased.
Hand in hand with alternative energy submissions, the Social Responsibility category was active. All of the alternative energy deals were presented in this space. In addition, the African Finance Company’s debut Sukuk joined Ihsan’s retail launch and Bank Islam’s fintech-based approach to offering restricted investment accounts.
The DOTY always enjoy a strong real estate showing. This is not the case in 2017. There is a small Brexit effect with opportunistic investment in UK real estate. But privacy informed the lack of US and European deals.
The distribution of currencies by transaction (not volume) reveals two important market realities. The first is that US dollar liquidity is still high and rates have risen very much over the course of 2017. As a result, emerging and frontier markets continue to enjoy access to the US dollar at favorable rates. Nonetheless, ongoing budget deficits have affected local currency access in many countries, hence local currency transactions may have been subdued. This will likely feature into 2018.
Malaysia’s market dominance continues to show with 30% of all transactions submitted in the Malaysian ringgit. The US dollar is the dominant currency with a 50% market share. Keep in mind that Saudi Arabian, Malaysian, UAE, Pakistani and Turkish deals were often executed in US dollars.
Seventeen of the winners were Sukuk. The DOTY are not limited to Sukuk. Nonetheless, the DOTY is a good tool to diagnose the progress of Sukuk. One continues to ask when and how the Sukuk market will break out. The answer lies in the adoption of Sukuk into corporate finance strategies. This has not happened as quickly as hoped. Despite Jordan’s benchmark Sukuk in 2016, neither agencies nor corporates have followed. The pattern is repeated in almost all Sukuk markets, well established or newly launched.
Nominations represented 35 product and country categories. Winners came from 12 countries of the 20 submitting. 2017 proved to be an active and robust year. With steady growth and no deterioration in hydrocarbon prices, we expect to see a continuation in the 2018 trend.
Africa: AFC Sukuk Company | |
Obligor: | Africa Finance Corporation |
Deal size: | US$150 million |
Arrangers: | Emirates NBD Capital, Rand Merchant Bank (a division of FirstRand Bank) and Bank of Tokyo Mitsubishi MUFG Securities EMEA |
Lawyers: | Walkers advising the issuer, Dentons advising the obligor for the issuer and King & Spalding advising the arrangers |
Rating: | ‘A3’ by Moody’s Investors Service |
Date closed: | 17th January 2017 |
Shariah advisors: | Emirates Islamic |
The ITFC sponsored most of the nominations from Africa. Each of these brought capital and innovation to some of the continent’s most impoverished countries. On the continental level, the Africa Finance Corporation (AFC)’s debut Sukuk facility represents several important achievements.
Beyond starting 2017’s Sukuk activity, the AFC is the first African multilateral to issue Sukuk. Representing the aspirations of the continent, the Lagos-based entity enjoyed high demand and the deal was increased from a planned US$100 million to US$150 million. Rated ‘A3’ by Moody’s, it is among the highest-rated Sukuk ever issued by an African institution. One important factor is that the AFC deal demonstrates that multilateral organizations are not necessarily tied to the economy or the rating of their host country. And, like the IDB, Asian Development Bank and others, the AFC has investment grade credit, even if many of its members do not. he deal is based on Tawarruq delivered through the NASDAQ Murabahah platform as follows: 1. The SPV uses the issuance proceeds to acquire illiquid portfolio certificates listed on the NASDAQ Dubai Murabahah platform. 2. The SPV then, through a Wakeel/agent on-sells such portfolio certificates to the obligor at their cost price plus profit on a spot and deferred payment basis. 3. The obligor then immediately on-sells such portfolio certificates to market participants for an amount equal to the Sukuk issuance proceeds. On the one hand, the Tawarruq deal is the easiest point of entry for a conservative multilateral body to enter the Islamic finance market. On the other hand, the transaction itself demonstrates the effectiveness of the NASDAQ Dubai platform. Honorable mention: Société Burkinabé des Fibres Textiles and Chad Industries Company |
Shortlisted for DOTY 2017 | |
Bahrain: ABG Sukuk | |
Obligor: | Al Baraka Banking Group |
Deal size: | US$400 million |
Joint lead managers: | Standard Chartered Bank (also acting as global coordinator), Dubai Islamic Bank, Arab Banking Corporation, Emirates NBD, KFH Capital, Noor Bank and QInvest |
Lawyers: | Linklaters and Zu’bi Partners Attorneys & Legal Consultants for the issuer and Allen & Overy and Hassan Radhi & Associates for the arrangers |
Rating: | ‘BB+’ (Negative) by S&P |
Date closed: | 23rd May 2017 |
Shariah advisors: | Standard Chartered Bank, Dubai Islamic Bank, KFH Capital, Noor Bank, QInvest and Dar Al Sharia |
Like Malaysia and the UAE, Bahrain hosts one of the key global centers for Islamic finance. This generates a wealth of excellent transactions. Even the domestic real economy is active with Alba and Viva generating attractive deals.
In difficult times, the ABG Sukuk reaffirm confidence in Bahrain and its international Islamic finance sector. Al Baraka, a holding company in all but name, not only issued the first Bahraini Tier 1 US dollar Sukuk, it issued the first non-investment grade Sukuk from the GCC. Honorable mention: Alba and Viva |
Shortlisted for DOTY 2017 | |
Egypt: Scatec Solar for six companies: Aswan PV Power, Kom Ombo for Renewable Energy, Red Sea Solar Power, Upper Egypt Solar Power, Zafarana Solar Power, Daraw Solar Power; and Banque Misr | |
Deal size: | US$335 million |
Arrangers: | IDB, European Bank for Reconstruction and Development, ICD, Nederlandse Financierings Maatschappij Voor Ontwikkelingslanden and The Green Climate Fund |
Lawyers: | Eversheds for the obligors and Clifford Chance for the financiers |
Guarantor: | Scatec Solar |
Rating: | Unrated |
Date: | 19th October 2017 |
Shariah advisors: | Shariah advisory boards of the IDB and ICD |
Egypt is starting to show its potential for the Islamic finance market. ADIB-Egypt and Banque Misr brought forward the Al Marasem deal. In 2017, the ICD added its weight to support the market with its role in the Scatec deal, as well as Alpha Solar. Scatec, the winner, jumps to the fore as an Islamic structured project finance deal for a Norwegian company applying Istisnah-Ijarah in support of six Egyptian solar projects.
One of Scatec’s missions is to deliver affordable solar power. In Egypt, Scatec achieved this by guaranteeing a diverse multilateral and multisource (there is a conventional tranche) coalition including the IDB and its affiliate the ICD, as well as a Dutch fund and the Green Climate Fund. The Green Climate Fund’s contribution of US$48 million is their largest to date and its first under its agreement with the European Bank for Reconstruction and Development. The solar projects form part of the 2 GW solar FiT program launched by the Egyptian government in 2015, and represent the largest portfolio of projects developed by the same sponsor group as part of that Egyptian Phase 2 FiT program. |
Indonesia: Sumberdaya Sewatama | |
Deal size: | IDR1.8 trillion (US$135.3 million) |
Underwriter: | Bank CIMB Niaga for bonds and Sukuk, Bank Syariah Mandiri for Islamic financing |
Lawyers: | Assegaf Hamzah & Partners for the obligor and Hadiputranto, Hadinoto & Partners (member firm of Baker McKenzie) for the financiers |
Rating: | Unrated |
Date closed: | June 2017 |
Shariah advisors: | Not stated |
The Republic of Indonesia keeps pushing frontiers and experimenting with new forms. An important factor in the Republic’s structuring efforts is the ban on Tawarruq. The 2017 series blends Ijarah and the sale of beneficial rights to property under development. Persero raised the largest-ever Indonesian rupiah funding in a Musharakah arrangement.
Sumberdaya Sewatama had three creditor groups in the restructuring. The creditors were mostly bilateral conventional lenders and Bank Shariah Mandiri, and Sukuk and bondholders. The bilateral lenders were restructured into a single syndication. The three classes did not cost at the same time, which required non-discriminatory undertakings and a standstill period to ensure that the creditors who signed first have the right to amend the terms of the deal on the basis of discriminatory treatment and to freeze certain cross defaults from occurring until all restructuring phases were completed. As much as the creditors were predominately conventional, the process included Indonesia’s first restructuring of a Shariah financing and a Sukuk issuance. This should set precedents for future restructuring of Islamic deals whether stand-alone or part of multi-party financings with conventional and Islamic financiers. Honorable mention: Perusahaan Penerbit SBSN Indonesia III and Perusahaan Listrik Negara (Persero) |
Kuwait: Warba Tier 1 Sukuk | |
Obligor: | Warba Bank |
Deal size: | US$250 million |
Arrangers: | Standard Chartered Bank (global coordinator), Emirates NBD, KAMCO Investment Company, Noor Bank, Arab Banking Corporation, KFH Capital Investment Company |
Lawyers: | Dentons & Co, Maples and Calder (Dubai) and Al Tamimi & Company for the issuer and Linklaters, Dentons & Co, Maples & Calder (Dubai) and Meysan Partners for the arrangers |
Rating: | Moody’s: ‘Baa2’ (Stable)/Fitch: ‘A+’ (Stable) |
Date closed: | 7th March 2017 |
Shariah advisors: | Standard Chartered Bank, KFH Capital and Noor Bank |
In 2017, Kuwait nominees stood out. Equate issued the first corporate international Sukuk from Kuwait. Americana’s buyout was leveraged. And Deliv ery Hero doubled down on the Kuwait market with the acquisition of trycarriage.com.
Warba Bank came to market twice during the year with a US$400 million syndication and its inaugural regulatory capital issuance. The five-year non-callable subordinated Sukuk qualify as additional Tier 1 capital under the Central Bank of Kuwait’s Basel III framework. The Mudarabah certificates are listed on the Irish Stock Exchange and NASDAQ Dubai. Not only did Warba open the Tier 1 issuances in 2017, but it demonstrated the viability of a smaller, newer regional bank as well as global investor confidence in the Kuwait market. The structure includes a unique approach to the mechanics of non-payment events and definition of distributable funds based on the youth of the bank. Honorable mention: Equate, Americana, and Delivery Hero |
Malaysia: CMC Group | |
Deal size: | RM12 million (US$3.03 million) |
Sponsoring bank: | Bank Islam Malaysia |
Lawyers: | Kadir Andri & Partners for Bank Islam Malaysia |
Rating: | ‘a3’ by RAM Ratings |
Date: | 26th July 2017 |
Shariah advisors: | Bank Islam Malaysia/IAP Platform |
Malaysia offers a cornucopia of best deals, and contested most categories with excellent nominations. In 2017, Bank Islam Malaysia offered proof of concept of the national fintech-based Investment Account Platform (IAP or iaplatform.com).
Bank Islam sponsored the CMC transaction on the platform as part of its adjustment to the Islamic Financial Services Act 2013. The Act requires Musharakah, Mudarabah and Wakalah ‘deposits’ to reflect the underlying investment performance. This moves these transactions to be more like investments than deposits. Nonetheless, even on the IAP, these investments reflect the reputation of the sponsoring bank and Bank Islam still pays attention to the transactions as if it was a traditionally intermediated transaction. On the one hand, CMC accesses the IAP as an alternative means to secure financing. CMC is able to access a broad range of investors. On the other hand, the investors gain financial exposure to a specific CMC lead project in Vietnam. Honorable mention: Tadau Energy, Quantum and Ihsan |
Pakistan: WAPDA — DASU — I (Government of Pakistan) | |
Deal size: | PKR144 billion (US$1.3 billion) |
Arrangers: | Habib Bank, National Bank of Pakistan, United Bank, Bank Alfalah, Askari Bank, Faysal Bank and Meezan Bank |
Lawyers: | Mohsin Tayebaly & Co. for the financiers |
Rating: | Unrated |
Date closed: | March 2017 |
Shariah advisors: | Habib Bank and Meezan Bank |
Pakistan is one of the most active Islamic finance markets.
The Islamic Republic returned to the market with a new international Sukuk. The ITFC was active in the hydrocarbon sector. And Meezan Bank sustained their traditional high level of activity. WAPDA is a continuous participant in the financial markets as it expands power and water access throughout Pakistan. WAPDA — DASU — I is a dual tranche conventional and Islamic sourced project financing. The Islamic portion of the facility was structured with two tranches. The first was a privately placed government of Pakistan-backed Sukuk of PKR52.8 billion (US$478.3 million). The second was an asset-backed syndicated Islamic facility of PKR33.6 billion (US$304.4 million) structured as a diminishing Musharakah. Through this, the syndicate purchases undivided ownership shares from time to time in the underlying Musharakah assets and pays the purchase price to WAPDA. This creates the staged project financing. Honorable mention: The Third Pakistan International Sukuk Company and Power Holdings |
Qatar: Al Jaber Engineering Co | |
Deal size: | QAR1.68 billion (US$458.23 million) |
Arrangers: | Qatar Islamic Bank |
Lawyers: | Qatar Islamic Bank’s internal counsel |
Rating: | Unrated |
Guarantee: | Corporate and personal guarantees of all partners including: Al Jaber Holding. |
Date closed: | August 2017 |
Shariah advisors: | Qatar Islamic Bank |
The Qatari market showed resilience given many challenges in 2017. Ezdan was able to return to the market as were Qatar Islamic Bank and QIIB. Underpinning the Qatar market is the massive preparation for the 2022 FIFA World Cup. Companies like Al Jaber Engineering Co (a general contractor established in 1995 as part of Al Jaber Group) are an important part of the process.
Qatar Islamic Bank provided project facilities including goods Murabahah letters of credit, Musawwamah and commodity Murabahah. The Al Jaber facilities demonstrate the key role that Islamic finance plays in the real economy. Honorable mention: Ezdan Sukuk Company and QIB Sukuk (Qatar Islamic Bank) |
Saudi Arabia: KSA Sukuk (Ministry of Finance Saudi Arabia) | |
Deal size: | US$9 billion in two tranches of US$4.5 billion — one for five years and one for 10. Each tranche was made available to US investors via a 144A offering |
Joint global coordinators, lead managers and bookrunners: | Citigroup, HSBC and JPMorgan |
Joint lead managers and bookrunners: | BNP Paribas, Deutsche Bank and NCB Capital |
Lawyers: | Latham & Watkins (English law and US law), Law Office of Salman Al-Sudairi in association with Latham & Watkins (Saudi law) and White & Case (English law and US law), White & Case in association with the Law Firm of Al Salloum and Al Toami (Saudi law) |
Rating: | Moody’s: ‘A1’/Fitch: ‘A+’ |
Date closed: | 13th April 2017 |
Shariah advisors: | Shariah boards of the arrangers |
Economists call it crowding out. In 2017, the Kingdom of Saudi Arabia had a large number of exciting deals. Saudi Aramco issued their first-ever Sukuk. Dar Al-Arkan came back to market with an innovative deal. But the government pushed these and other meritorious deals aside with its own super-sized, innovative deal.
The transaction is based on the hybrid Mudarabah/Murabahah structure. This avoids identification and transfer of asset ownership. The structure is designed to be scalable and allow for new issuances without changing the asset structure. The deal was well received by the scholarly community and the investor community. The latter assured that the deal would have the largest-ever orderbook for a two-tranche deal. One of the important investor issues was management of new US asset retention rules. The deal was followed in July with the largest-ever domestic Sukuk issuance. Honorable mention: Dar Al-Arkan and Saudi Aramco |
Turkey: KT Sukuk Varlik Kiralama | |
Obligor: | Toprak Mahsulleri Ofisi (Turkish Grain Board) |
Deal size: | TRY100 million (US$26.7 million) |
Bookrunner: | Halk Yatirim Menkul Degerler |
Lawyers: | Not stated |
Date closed: | 27th November 2017 |
Rating: | TURKrating – TR ‘A1’ |
Shariah advisors: | Isfa Academy |
Turkey is slowly but surely emerging as a key player for the global Islamic finance market. Certainly, the well-received Republic of Turkey (Hazine) deal demonstrates that. GAP Insaat also shows greater private sector openness to Islamic finance as well as innovation. It is the domestic acceptance of Islamic finance in G20 economies like Turkey, Saudi Arabia and Indonesia that is critical for market growth.
An important development for the domestic Turkish Islamic finance market is the launch by the Turkish Grain Board – Toprak Mahsulleri Ofisi’s first Sukuk. This shows a growth of agriculture-related activities supported by Islamic finance (the ITFC has pioneered transactions with Turk Eximbank). It also shows the greater acceptance among government agencies to apply Islamic finance in their capital structures and purchasing activities. The Toprak Mahsulleri Ofisi is structured as Wakalah Bil Istithmar. The deal represents continued expansion for domestic Sukuk beyond the participation banks. Honorable mention: Hazine Mustesarligi Varlik Kiralama Anonim Sirketi (Republic of Turkey) and GAP Insaat Yatirim ve Dis Ticaret |
UAE: Airport Financing Corporation FZE (FINCO) | |
Deal size: | AED5.05 billion (US$1.37 billion) |
Mandated lead arrangers and bookrunners: | Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Citibank UAE, Dubai Islamic Bank, First Abu Dhabi Bank, Noor Bank, Standard Chartered Bank (UAE branch) |
Lawyers: | Allen & Overy for the issuer and Linklaters for the arrangers |
Rating: | Unrated |
Guarantor: | Investment Corporation of Dubai, Department of Finance for the Government of Dubai and the Dubai Aviation City Corporation |
Date closed: | 24th July 2017 |
Shariah advisors: | Shariah Supervisory Board of Abu Dhabi Islamic Bank and Dar Al Sharia |
Airport Financing Company FZE, a structured Islamic and conventional financing platform to fund the expansion and development of Dubai International Airport, as well as the transformation of Al Maktoum International Airport. This transaction involved the development of a flexible funding platform, which allows for the piecemeal integration of multiple Shariah compliant financing products (including Ijarah, Murabahah, Wakalah and various Sukuk structures) into an overall multisource financing structure. The platform can also support conventional debt. The Islamic facility is an Ijarah facility backed by a sub-Musatahah right.
Honorable mention: Emirates REIT and Tabreed |
Oman: Oman Sovereign Sukuk (Ministry of Finance Oman) | |
Deal size: | US$2 billion |
Bookrunners: | Standard Chartered Bank DIFC Branch, Alizz Islamic Bank, Citigroup Global Markets, Dubai Islamic Bank, Gulf International Bank, HSBC Bank and JPMorgan Securities. |
Lawyers: | Al Busaidy Mansoor Jamal & Co in Oman, Clifford Chance Europe in France, Clifford Chance in Dubai, Maples & Calder for the issuer and Linklaters, Dentons and Co (Oman branch) in Oman for the arrangers |
Guarantor: | Ministry of Finance, Sultanate of Oman |
Rating: | ‘Baa1’ (Stable)/‘BB+’ (Negative)/‘BBB’ (Stable) |
Date closed: | 23rd May 2017 |
Shariah advisors: | Gulf International Bank |
In 2017, Bank Muscat’s Meethaq issued their first Sukuk based on a diminishing Musharakah participating in a pool of the bank’s assets.
Competing for honors was the Mazoon Assets Company deal. Each would stand out were it not for the first-ever international public Sukuk issuance by the Sultanate of Oman. The deal is also the second-largest US dollar Sukuk issued out of the GCC since July 2012. The Ijarah certificates were the Sultanate’s first-ever trust certificates issuance program. The Sukuk assets comprised a share of the government’s interest in a plot of land earmarked for development. The assets were selected after extensive due diligence by the legal counsel and Shariah advisors. As with similar cases, the structure required consideration of restrictions on the sale of national assets. The deal was issued in 144A and Reg S forms. Despite S&P’s recent downgrade of Oman to sub-investment grade, the certificates were well received. This demonstrates the attractiveness of Oman for future transactions and helps to support Omani agencies and corporates should they wish to approach the global market. Honorable mention: Meethaq Islamic Banking and Mazoon Assets Company |
Commodity Murabahah/Tawarruq: Danajamin Nasional | |
Deal size: | RM500 million (US$126.35 million) under a RM2 billion (US$503.8 million) program |
Arrangers: | Maybank Investment Bank and AmInvestment Bank |
Lawyers: | Albar & Partners for the issuer and Adnan Sundra & Low for the arrangers |
Rating | ‘AA1’ by RAM Ratings and ‘AA+’ by Malaysian Rating Corporation |
Date: | 6th October 2017 |
Shariah advisors: | Amanie Advisors, AmBank Islamic and Maybank Islamic |
The Tawarruq deals kicked off in 2017 with the African Finance Company’s first Islamic finance issuance via AFC Sukuk Company. The deal was an African multilateral first, and the first cross-border US dollar Sukuk from a Nigeria-based entity. Daewoo Engineering and Construction raised facilities of QAR1 billion (US$275.1 million) from Qatar Islamic Bank. Linked to national infrastructure projects, the transaction is one of the first Islamic finance deals for a major Korean contractor.
Danajamin Nasional is Malaysia’s only monoline guarantor and first financial guarantee insurer. Danajamin is regulated under the Malaysian Financial Services Act 2013. Danajamin issued Tier 2 subordinated Sukuk Murabahah in the company’s inaugural Sukuk issuance. The transaction is part of a RM2 billion senior and subordinated Sukuk Murabahah (Tawarruq) program. The subordinated Sukuk facility has a tenor of 10 years and a callable option from Year 5. Not only does the program provide new capital resources to the company, it supports Danajamin’s mandate to assist new and viable companies to participate in Malaysia’s debt capital market. Honorable mention: AFC Sukuk Company and Daewoo Engineering and Construction |
Corporate Finance: Delivery Hero | |
Counterparties: | Delivery Hero and TryCarriage.com |
Lawyers: | King & Spalding advising Delivery Hero, Sullivan & Cromwell advising on the IPO, Freshfields advising the sellers on trycarriage.com, Hourani & Associates advising the sellers of Talabalat.com and Dentons advising the sellers of Yemeksepeti |
Rating: | Unrated |
Date closed: | 29th May 2017 |
Shariah advisors: | Maybank Islamic |
The corporate finance market was much more varied in 2017. Kuwait comes front and center. In 2017, Kuwait’s pioneering food group Kuwait Food Company (Americana) was acquired by prominent Dubai businessman Mohammed Alabbar. The deal was funded in part with a US$592 million syndicated facility. Another important deal was the Toprak Mahsulleri Ofisi (Turkish Grain Board) via SPV — KT Sukuk Varlik Kiralama TRY100 million (US$26.47 million) maiden Sukuk which introduced Islamic finance into the government agency sector.
But the tech frontier comes to the fore with Delivery Hero’s ongoing expansion in the MENA region. King & Spalding has guided Delivery Hero previously. They advised the German group on the acquisition of Foodpanda, Kuwait’s talabat.com and Turkey’s Yemeksepeti. King & Spalding advised Delivery Hero, one of Europe’s largest and fastest-growing tech start-ups, on its acquisition of the online and mobile food ordering and delivery company Carriage. This significantly builds Delivery Hero’s competitive position opposite its competitor Deliveroo. Delivery Hero CEO Niklas Östberg said: “Carriage is an innovative player in the Middle Eastern food delivery market with an excellent management team. It will be a perfect addition to our current offering under the Talabat brand and strengthen our foothold in this region, where we see significant growth potential.” This is because Talabat is an app without its own delivery and Carriage includes delivery service. trycarriage.com itself is a great story as the company was founded just in 2016 by Abdallah and Musab Al Mutawa, Jonathan Lau and Khaled Al Qabandi. Musab and Lau met during their studies at Stanford University. The transaction had a complex earn-out mechanism. The Mudarabah was structured through the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Center. The ADGM tranche provided flexibility to entrench a redemption right of certain management shares following the completion of the earn-out. Honorable mention: Kuwait Food Company (Americana) and Toprak Mahsulleri Ofisi (Turkish Grain Board) |
Cross-border: Souqalmal Holding, a Mauritius-based holding company for souqalmal.com | |
Deal size: | US$1.5 million |
Counterparties: | Riyad TAQNIA and GoCompare |
Financiers: | Riyad Capital providing venture capital for Riyad TAQNIA Fund (RTF); Saudi Technology Development and Investment Company (TAQNIA) providing venture capital for Riyad TAQNIA Fund |
Co-investors: | GoCompare, UAE Exchange, Hummingbird Ventures |
Lawyers: | King & Spalding advising Riyadh TAQNIA Fund (lead investor), Simmons & Simmons advising GoCompare |
Date: | 3rd October 2017 |
Shariah advisors: | Riyad Capital’s Shariah board |
Trowers & Hamlins worked for Warba Bank of Kuwait on a UK real estate acquisition that included an innovative Takaful solution.
Adl Capital of Sri Lanka successfully secured a US$10 million funding line for LOLC Finance’s Islamic business unit, Al-Falaah, from the ICD. This was the single largest bilateral transaction between an Islamic financial institution based overseas and an Islamic finance unit in the non-banking sector in Sri Lanka. King & Spalding advised its client RTF as leader of the US$10 million Series B round for souqalmal.com, one of the leading financial services comparison websites in the Middle East. Souqalmal Holding, based in Mauritius, received the funds in the form of common and preferred share issuances. RTF is a venture capital fund established by Riyad Capital (the investment banking subsidiary of Riyad Bank) and TAQNIA, which is owned by the Public Investment Fund (PIF, Saudi Arabia’s sovereign wealth fund). In addition to the PIF, the investors in RTF include the Saudi Arabian Public Pension Authority and Saudi Credit and Savings Bank. Co-investors in the transaction included UK financial services comparison website GoCompare which is listed on the London Stock Exchange and regulated by the UK Financial Conduct Authority; UAE Exchange, the largest financial exchange and remittance company in the UAE; and Hummingbird Ventures, the Belgium-based venture capital firm. The transaction is a key Shariah compliant Middle Eastern fintech transaction. It brings together UK, European, Mauritian, Saudi and UAE counterparties, most of which are regulated, into a cutting-edge transaction geared toward the GCC’s tech literate millennials. The transaction funds the growth of operations in the UAE and planned expansion into Saudi Arabia, where the company has entered into an MoU to launch a branch which would be regulated by the Saudi Arabian Monetary Authority. Honorable mention: KIA Distribution and Al Falaah |
Equity: Alpha Real Estate Investment Trust | |
Size: | RM334 million (US$84.4 million) |
Arranger and bookrunner: | Maybank Investment Bank |
Lawyers: | Adnan Sundra & Low for Maybank Investment Bank. |
Financial advisor: | Nomura Securities Malaysia |
Date: | 29th June 2017 |
Trustee: | RHB Trustees |
Shariah advisor: | IBFIM |
Equity had a real estate flavor with Eco World’s IPO. Meezan Bank’s financing of Pakistan’s Orient Rental Modaraba brought the service sector forward. Among the outstanding deals in Malaysia is the Alpha REIT.
Alpha is Malaysia’s first Shariah compliant private REIT, dealing with purely education-related properties. Most REITs are listed, but the Malaysian REIT Guidelines allow for the establishment of unlisted REITs. The Securities Commission Malaysia allows the establishment of unlisted REITs based upon the management company’s purpose, as well as demonstration that the REIT managers are able to scale up their portfolio of income-generating assets. The market typically views unlisted REITs as illiquid and less transparent than public-listed REITs. Alpha as a private REIT was distributed to institutional investors only. The Alpha REIT has been established to invest in Shariah compliant income-producing real estate used substantially for education or education-related purposes. Alpha is unusual in that its assets are sourced from multiple vendors, not the REIT’s sponsors. Honorable mention: Eco World and Orient |
Hybrids: EQUATE Sukuk SPC | |
Obligors: | EQUATE Petrochemical Company and the Kuwait Olefins Company |
Deal size: | US$500 million |
Arrangers: | Citi, HSBC, JPMorgan, KFH Capital and National Bank of Kuwait |
Bookrunners: | First Abu Dhabi Bank, Bank of Tokyo Mitsubishi MUFG, Mizuho and SMBC Nikko |
Lawyers: | White & Case for the issuer and Clifford Chance for the arrangers |
Rating: | Moody’s: ‘Baa2’/S&P: ‘BBB+’ |
Date closed: | 13th February 2017 |
Shariah advisors: | Shariah advisory boards of HSBC and KFH Capital |
The traditional hybrid Sukuk facility is structured in a manner similar to Sunway Treasury Sukuk. This program allows for periodic issuances under Wakalah Bil Istithmar or Tawarruq. The uniqueness of the program is that the tranches do not have to be balanced in a particular way.
Another hybrid is more common in the construction sector and demonstrated by Tadau Energy. This pairs Istisnah with a described lease (Ijarah Mawsufah Bi Dhimmah). EQUATE represents the largest-ever corporate Sukuk issued out of Kuwait and the largest-ever international eurobond wholly guaranteed by Kuwaiti entities. It is also the first Sukuk for a Kuwaiti corporate. In itself, the transaction is unique as a hybrid. Most hybrids are ‘asset invisible’ with a Wakalah, Mudarabah or Musharakah in some business operation and then Tawarruq to raise funds and guarantee the transaction repayment in the flow. In this transaction, the Sukuk are based on Ijarah Muntahiya Bil Tamleek (lease ending in ownership) for 52% and Tawarruq for the remainder. As a result, the company receives funding from both sale and leaseback as well as Tawarruq. But the Ijarah wing produces a clear claim on capital from the obligor’s promise to purchase. And the Tawarruq wing’s Murabahah outstanding covers the remainder. Therefore, there is no need to stretch the Murabahah debts to cover all of the capital and periodic payments. Honorable mention: Sunway and Tadau |
Ijarah: Mazoon Assets Company | |
Size: | US$500 million |
Joint lead managers: | Bank Muscat, JPMorgan Securities, First Abu Dhabi Bank and KFH Capital Investment Company |
Co-managers: | Warba Bank and Noor Bank |
Legal counsel: | For the issuer: Dentons (English law), Dentons UKMEA (US federal law) and Dentons Oman Branch (Omani law). For the joint lead managers: Allen & Overy (English law), Allen & Overy (US federal law) and Al Busaidy Mansoor Jamal & Co (Omani law). |
Rating: | Moody’s: ‘Baa2’ (Negative)/Fitch: ‘BBB’ (Negative) |
Date: | 8th November 2017 |
Shariah advisors: | JPMorgan Securities |
Pinsent Masons and Dar Al Sharia advised the financiers supporting the ABTEC Group parties on a complex described lease with Istisnah. Another top contender was Airport Financing Company FZE and its structured Master Musatahah Rights Purchase Agreement and Master Ijarah Agreement. Each transaction demonstrated greater sophistication in the adoption of Ijarah structures. Mazoon Assets Company achieved several landmarks for Sukuk Ijarah.
Listed on the Irish Stock Exchange, Mazoon Assets Company marks the first international corporate Sukuk issue out of Oman. The deal is the first corporate Sukuk with Reg S and 144A tranches out of MENA since May 2016. The deal is the first-ever Sukuk from the regulated electricity distribution sector which required structuring the transaction within the restrictions of the Sector Law of Oman. This law limits creation of security interests and subsidiaries by licensed distributors like Mazoon Electricity Company. The transaction required intense discussions with the regulator on structuring the transaction such that it was compliant with the Sector Law. The deal also demonstrated the efficacy of Oman’s Sukuk law, which uses an SPV in lieu of a trust. The concept and structure were not deterrents to global and US investors who respectively took up 30% and 13% of the deal. Honorable mention: Airport Finance Co and ABTEC |
Shortlisted for DOTY 2017 | |
Project & Infrastructure Finance: Quantum Solar Park (Semenanjung) | |
Size: | RM1 billion (US$251.9 million) |
Arranger: | CIMB Investment Bank |
Bookrunners: | CIMB Investment Bank and Maybank Investment Bank |
Legal counsel: | Zaid Ibrahim & Co. for the issuer and Adnan Sundra and Low for the arranger |
Rating: | ‘AA-’ by Malaysian Rating Corporation |
Shariah advisor: | CIMB Islamic Bank |
Dubai’s Airport Finance Company brings a novel platform style approach to the market in support of the ongoing expansion and modernization of Dubai’s two airports. Solar is the leading theme in this year’s alternative energy submissions. Malaysia and Egypt were very active with solar. Quantum Solar and Tadau Energy stand out in Malaysia and Alfanar and Scatec for Egypt. Scatec represents a Norwegian company engaging in six Egyptian solar projects. Quantum Solar or ‘QSP Semenanjung’ is a green SRI Sukuk and the world’s largest green sustainable and responsible investment Sukuk issuance to date.
The Sukuk finance three solar photovoltaic plants of 50 MWac each in Gurun (Kedah), Merchang (Terengganu) and Jasin (Projects) on a ‘build-own-operate’ scheme. With a combined capacity of 150 MWac, QSP Semenanjung will be the largest solar power producer in Malaysia. The Projects are expected to be instrumental in helping Malaysia reach its ambition of 1 GWac from large-scale solar by 2020 and contribute toward sustainable electricity supply and the reduction of carbon emission in Malaysia in line with the National Renewable Energy Policy and National Green Technology Policy of Malaysia. Even if the method of finance is Tawarruq, the QSP Semenanjung Green Bond Framework received a Dark Green shading from the Center for International Climate Research. The Dark Green shading is for projects and solutions that entail zero emission solutions and governance structures that integrate environmental concerns into all activities. Honorable mention: Scatec, Tadau, Airport Finance |
IPO (Sukuk): Ihsan Sukuk | |
Size: | RM100 million (US$25.67 million) |
Arranger: | CIMB Investment Bank |
Bookrunners: | CIMB Investment Bank, Maybank Investment Bank and RHB Investment Bank |
Lawyers: | Zaid Ibrahim & Co (a member of ZICO Law) for the arranger |
Guarantor: | Khazanah Nasional (obligor) |
Shariah advisor: | Amanie Advisors and CIMB Islamic |
Rating: | ‘AAA(s)’ by RAM Rating Services |
Date: | 8th August 2017 |
Abu Dhabi National Oil Company for Distribution listed on the Abu Dhabi Securities Exchange. This is the first IPO in six years and the largest since 2007. Orient Rental Modaraba brought a new approach to Mudarabah investing to the market with its equipment leasing focus.
Ihsan Sukuk returned with a new issuance of RM100 million (US$25.67 million). This included a retail tranche. This is the first-ever to be offered via reward crowdfunding platforms, allowing participation from the Malaysian public with investments as small as RM10 (US$2.56). Ihsan demonstrates that socially aware investing can succeed in the retail market among small investors. The Ihsan model is a pay-for-performance model under which the investors earn less if the underlying schools perform to specified key performance indicators. Otherwise, the investors are entitled to the full value of their investment at maturity. Honorable mention: Orient Rental Modaraba and ADNOC Footnote: |
Most Innovative: KIA Distribution Center, Immingham | |
Size: | GBP25 million (US$34.43 million) |
Financier: | National Bank of Kuwait (London branch) |
Ultimate investor: | Warba Bank |
Counterparties: | (1) Oxenwood Catalina (Guernsey) and (2) Al Kout Estate Holdings (Jersey) |
Legal counsel: | Trowers & Hamlins for the buyer and Jones Day for the seller |
Rating: | Unrated |
Date: | 16th March 2017 |
Shariah advisors: | Shariah supervisory board of Warba Bank |
In 2017, innovative deals and new thinking abounded. One example is Airport Financing Company – FINCO (Dubai Airports). The Elaaj, Saudi Healthcare Investment Company and Boubyan Petrochemical. transaction was a highly complex equity deal involving foreign ownership in the Saudi Arabian company. And in the UK, Warba Bank sponsored an innovation in the UK Shariah compliant real estate sector.
Warba acquired, through a newly established offshore holding structure, 100% of the issued share capital of the corporate owner of the property known as the KIA Distribution Center, Immingham. Trowers & Hamlins represented the bank. The deal was financed on a Shariah compliant basis by the National Bank of Kuwait (London branch). As Warba’s first entry into the UK commercial property market, the deal utilized a tax driven offshore structure to optimize the acquisition and holding of the asset. As an acquisition of an existing property-owning offshore SPV, rather than the property itself, and in view of the seller’s desire to limit its liability in respect of any warranties provided to the purchaser, the transaction required the first Shariah compliant warranty and indemnity insurance policy ever issued by a UK insurer in the London M&A market to be put in place at completion. The policy was taken out with AIG UK and its strategic partner Cobalt Underwriting. For the first time ever, Shariah compliant investors into the UK have a Takaful product which levels the playing field with conventional investors. Honorable mention: Airport Finance Co, Elaaj and KIA Distribution Center |
Mudarabah: PNC Investments | |
Deal size: | AED1.65 billion (US$449.17 million) |
Bookrunner and mandated lead arranger: | Dubai Islamic Bank |
Obligor: | PNC Investments |
Lawyers: | Pinsent Masons for Dubai Islamic Bank |
Date: | January 2017 |
Guarantor: | Corporate guarantee from Sobha Capital |
Shariah advisors: | Dar Al Sharia |
Most Mudarabah deals in 2017 were part of a hybrid structure in which the second wing of the deal is Tawarruq. This left a very limited number of Mudarabah deals. Bank capital deals like Al Baraka’s ABG Sukuk and Warba’s Tier 1 Sukuk followed the model of the increasingly familiar Tier 1 structures. The Orient Rental Modaraba was also an excellent proposition from Meezan Bank for Pakistan’s services sector.
Dubai Islamic Bank organized this bilateral Mudarabah financing transaction for PNC Investments. The obligor is the ultimate parent company of Sobha developers engaged in the Meydan Sobha joint venture. The deal was structured based on an assignment of the profit/dividend escrow accounts for specific real estate projects. These escrow accounts are regulated by Dubai Real Estate Regulatory Authority (RERA) and withdrawals are only allowed based on the completion of the project or through the approval of the RERA. Due to the nature of the underlying cash flows, the facility was structured with no fixed repayment schedule and the facility repayment was done through a cash sweep as and when funds are released from these escrow accounts. Additionally, the transaction was secured by mortgages and guarantees. The transaction allowed the company to monetize their future cash flows through a Mudarabah injection. Honorable mention: ABG, Warba and Orient Rental Modaraba |
Musharakah: Al Marasem Real Estate Development Company | |
Deal size: | EGP900 million (US$50.78 million) |
Arrangers: | ADIB-Egypt and Banque Misr |
Lawyers: | Dr Darwish Law Office for the obligor and Sarie El Din Law Office for the arrangers |
Date: | August 2017 |
Shariah advisor: | Banque Misr Shariah Team |
Standard Chartered led the syndication for KSRM Billet Industries which included a fixed rate BDT2.4 billion (US$28.79 million) Islamic tranche based on diminishing Musharakah. SkyWorld Capital, the funding vehicle for SkyWorld Development, included a Musharakah tranche. Meezan Bank structured its go-to diminishing Musharakah for Martin Dow’s acquisition of the Pakistan operations of Merck Network.
Banque Misr and ADIB-Egypt co-arranged the first syndicated Musharakah deal in the Egyptian market. The deal is the first Islamic finance transaction for an Egyptian real estate developer. In this deal, the ultimate sponsor of Al Marasem is Saudi Binladen Group. The Musharakah is a co-ownership of Al Marasem which already owns two plots in the Fifth Settlement district in New Cairo structured as a bridge facility. The deal demonstrates the continued penetration of Shariah compliant finance among private sector companies. Honorable mention: KSRM and Martin Dow |
Perpetual: Tanjung Bin Energy Issuer | |
Deal size: | RM800 million (US$202.16 million) |
Arrangers: | CIMB Investment Bank and Maybank Investment Bank |
Lawyers: | Shearn Delamore for the issuer and Albar & Partners for the arrangers |
Rating: | Unrated |
Date closed: | March 2017 |
Shariah advisors: | Maybank Islamic and CIMB Islamic Bank |
Typically, we see perpetual Sukuk issued by banks, as seen with ABG and Warba. An issuance by a non-financial services company is somewhat unusual.
Tanjung Bin Energy raised funds via its wholly-owned subsidiary Tanjung Bin Energy Issuer, which is a financing vehicle for the owner-operator of the Tanjung Bin power plant in Johor, Malaysia. The issue is for unrated perpetual Sukuk Wakalah of up to RM800 million (US$202.16 million). The issuer is appointed and acts as the Wakeel of the holders of the Sukuk Wakalah to invest the proceeds of the Sukuk Wakalah into Ijarah assets of the issuer and the balance to be applied to a Tawarruq transaction. The distinct feature of this Sukuk Wakalah facility is that it is backed by an unconditional and irrevocable subordinated cash deficiency support. Generally, perpetual Sukuk are not backed by any guarantee so this ‘unconditional and irrevocable subordinated cash deficiency support’ feature makes this deal notable. Nonetheless, the Sukuk Wakalah facility is expected to be classified as equity in the financial statements of the issuer, as well as Malakoff (the ultimate project sponsor) in accordance with the Malaysian Financial Reporting Standards. With this unique structure, the Sukuk Wakalah will not have any effect on the issued and paid-up share capital of Malakoff and/or the substantial shareholders’ shareholdings in Malakoff. The effects of the issuance of the Sukuk Wakalah on the consolidated earnings and consolidated earnings per share of Malakoff are not expected to be material. Honorable mention: ABG and Warba |
Real Estate: Emirates REIT (managed by Equitativa) | |
Size: | US$400 million |
Arranger: | Standard Chartered Bank |
Bookrunners: | Dubai Islamic Bank, Emirates NBD Capital, Standard Chartered Bank and Warba Bank |
Legal counsel: | Clifford Chance for the issuer and Dentons for the financiers |
Rating: | ‘BB+’ by Fitch |
Date: | November 2017 |
Shariah advisors: | Dar Al Sharia |
Even if the 2017 real estate submissions were surprisingly light, they were of high quality. ADIB-Egypt’s Al Marasem and Warba’s KIA Distribution Center each brought something new to the broader Islamic market. But Emirates REIT came forward with a major milestone.
In December 2017, Emirates REIT successfully closed a US$400 million five-year Sukuk issuance. The Sukuk represent the first MENA REIT Sukuk issuance. The transaction allowed the REIT to restructure its liabilities while expanding its funding base. The REIT was able to reach investors in Europe, the GCC and Asia. Honorable mention: Al Marasem and KIA Distribution Center |
Shortlisted for DOTY 2017 | |
Regulatory: ABG Sukuk | |
Obligor: | Al Baraka Banking Group |
Deal size: | US$400 million |
Joint lead managers: | Standard Chartered Bank (also acting as global coordinator), Dubai Islamic Bank, Arab Banking Corporation, Emirates NBD, KFH Capital, Noor Bank and QInvest |
Lawyers: | Linklaters and Zu’bi Partners Attorneys & Legal Consultants for the issuer and Allen & Overy and Hassan Radhi & Associates for the arrangers |
Rating: | S&P: ‘BB+’ (Negative) |
Date closed: | 23rd May 2017 |
Shariah advisors: | Standard Chartered Bank, Dubai Islamic Bank, KFH Capital, Noor Bank, QInvest and Dar Al Sharia |
Many Islamic banks went to market in 2017 for regulatory capital. Some of them operate in markets that require domestic ratings like Hong Leong Islamic Bank and Maybank Islamic Bank. Others like Warba have an investment grade rating.
Despite Bahrain’s importance as an Islamic banking center, Al Baraka issued the first Tier 1 US dollar Sukuk from that country. This was also the first such deal by a non-investment grade issuer from the GCC. The transaction was also Al Baraka’s first international debt capital markets deal. The transaction was supported by the successful capital issuances for one of the banks of Al Baraka Group: Al Baraka Turk Katilim Bankasi. Another feature of the transaction was that it was issued for a holding company. Al Baraka owns and operates 11 banks. Honorable mention: Hong Leong, Maybank and Warba |
Restructuring: United Arab Shipping Company | |
Deal size: | US$14 billion merger between United Arab Shipping Company (UASC) and Hapag-Lloyd. |
Islamic financiers: | Qatar Islamic Bank (QIB) — Tawarruq facility Bank of London and The Middle East (BLME) — Containers Ijarah |
Lawyers: | White & Case — legal counsel to UASC; Freshfields – legal counsel to Hapag-Lloyd on the M&A side; Allen & Overy — legal counsel to Hapag-Lloyd on the bank finance side; Watson Farley & Williams for the financiers |
Date closed: | May 2017 |
Shariah advisors: | Shariah advisory boards of QIB and BLME |
In 2017, Sime Darby restructured itself into three listed companies. This required a tender offer and consent from the domestic and international markets. In Indonesia, Sumberdaya Sewatama, as part of their overall debt restructuring, completed the first-ever Sukuk restructuring in that country.
White & Case advised UASC and its major shareholders Qatar Investment Authority and the Public Investment Fund of Saudi Arabia (PIF) on UASC’s multi-billion dollar merger with Hapag-Lloyd, a listed company headquartered in Hamburg, Germany. The new combined company is the world’s fifth-largest container shipping line, with a fleet of 230 ships and annual turnover of around US$12 billion. The transaction required amendments and restatements of UASC’s existing debt and a significant new refinancing facility. The negotiation process for the merger, including agreeing terms that fit comfortably within Hapag-Lloyd’s overall debt financing practices, was both challenging and complicated. Two of the key facilities were the QIB commodity Murabahah facility and BLME’s container leasing program. This deal is the largest cross-border M&A deal involving a Middle East-headquartered company in the last 10 years and the largest-ever M&A deal involving a Dubai International Financial Center (DIFC) company. The transaction involved a range of innovative structures, and even required the DIFC to amend the legislation and create a new corporate structure, the intermediate SPV regime. In addition, to make the transaction possible, UASC was first re-domiciled from an international state treaty-created company to a regular DIFC company. This was the first ever re-domiciliation of this type. Honorable mention: Sumberdaya Sewatama and Sime Darby. |
Social Impact: Société Burkinabé des Fibres Textiles (SOFITEX) (Government of Burkina Faso) | |
Deal size: | EUR107 million (US$131.01 million) |
Arranger: | ITFC |
Lawyers: | Not stated |
Guarantee: | Government of Burkina Faso |
Rating: | Unrated |
Date closed: | December 2017 |
Shariah advisors: | ITFC |
There is no doubt that the solar projects nominated from Egypt and Malaysia are going to achieve long-term social impact through the generation of green energy. Yet, the ITFC has a core mission to support IDB member countries and provide credit where it is often difficult to establish.
In the case of Burkina Faso, cotton is not only the major export product, but one that touches the lives of almost every citizen. Earlier in the decade, the country had been convinced to try genetically engineered seeds in response to a serious threat to the country’s native plants. Although the pest infecting the plants was staved off, the luxuriant long-fibered Burkinabe cotton was not replicated. As a result, the country had to reinvent their industry in order to protect the livelihood of millions by restoring their lustrous cotton. Through the introduction of pre-export finance, the ITFC ensures farmers that they will be paid on time and fairly. Consequently, motivation is enhanced and producers are ready to allocate more land to the cotton culture. The ITFC has also customized a solution for foreign exchange risk management. On the one hand, cotton trades in the US dollar and the IDB Group operates in the US dollar. On the other hand, Burkina Faso is a CFA country and the CFA is pegged to the euro. The ITFC’s solution provided protection against USD/EUR fluctuation. Honorable mention: Tadau Energy and Scatec |
Shortlisted for DOTY 2017 | |
Sovereign: KSA Sukuk Company (Ministry of Finance Saudi Arabia) | |
Size: | US$9 billion in two equal tranches of five and 10 years |
Arrangers: | Citi, HSBC, JPMorgan |
Bookrunners: | Citi, HSBC, JPMorgan, BNP Paribas, Deutsche Bank, NCB Capital |
Lawyers: | For the issuer: Latham and Watkins; Law Office of Salman M Al-Sudairi in association with Latham & Watkins and for the arrangers: White & Case; Law Firm of AlSalloum and AlToaimi in association with White & Case |
Rating: | Fitch: ‘A+’ (Stable outlook)/Moody’s: ‘A1’ (Stable outlook) |
Date closed: | 20th April 2017 |
Shariah advisors: | Shariah advisory boards of Citi Islamic Investment Bank, HSBC Saudi Arabia, JPMorgan Securities, Deutsche Bank, London Branch, BNP Paribas and NCB Capital Company |
Oman, Turkey and Indonesia all came back to the market in 2017. Oman’s new sovereign Sukuk issuance was notable for both being a US dollar issuance and an Ijarah. In addition to their pure sovereign issue, the Turkish Grain Board accessed the market with its first Islamic security.
The standout deal in 2017 was the Saudi Arabian US dollar issuance in Reg S and 144A formats. Saudi Arabia’s maiden international Islamic offering is the largest global Sukuk ever launched. Counsel White & Case worked to assure that the hybrid (Tawarruq and Mudarabah) transaction would take into account the new risk retention rules affecting US investors. The Mudarabah wing allowed participating in national assets without violating foreign ownership restrictions. Honorable mention: Oman and Toprak Mahsulleri Ofisi (Turkish Grain Board) via SPV — KT Sukuk Varlik Kiralama |
Sukuk: GAP Insaat Yatirim ve Dis Ticaret | |
Deal size: | US$118 million |
Arranger: | Aktif Bank Sukuk Varlik Kiralama |
Lawyers: | Hogan Lovells (Middle East) |
Rating: | Unrated |
Date closed: | May 2017 |
Shariah advisors: | Assistant Professor Dr Ishak Emi Aktepe |
Sukuk is always a highly contested sector. 2017 showed the largest-ever issuance from Saudi Arabia, the novel Mazoon Ijarah from Oman, Equate’s unique hybrid and Saudi Aramco’s debut transaction. And then there is Aktif Bank in Turkey always testing new concepts.
This Mudarib is Turkish construction company GAP Insaat Yatirim ve Dis Ticaret. The Mudarabah invests in an office building under construction and its land in Istanbul. The well-located property is under construction. Upon completion, the building will have 30 stores as well as corporate office space. Not only is the use of a Sukuk Mudarabah for construction unusual, but Hogans Lovells also advised Aktif Bank on the first Sukuk ever to be listed on the Global Exchange Market (GEM) of the Irish Stock Exchange. While the Irish Stock Exchange has listed many Sukuk, this is the first Sukuk for the GEM, which is one of the fastest-growing debt listing markets in Europe. Honorable mention: Equate, Aramco, Mazoon Assets and KSA Sukuk |
Shortlisted for DOTY 2017 | |
Syndicated: Airport Financing Company FZE (FINCO) | |
Deal size: | AED5.05 billion (US$1.37 billion) |
Arrangers and bookrunners: | Islamic tranche: Abu Dhabi Islamic Bank, Dubai Islamic Bank, Abu Dhabi Commercial Bank, First Abu Dhabi Bank, Noor Bank, Citibank, Standard Chartered Bank |
Lawyers: | Allen & Overy for the obligor and Linklaters for the banks |
Traffic consultants: | Nyras |
Rating: | Unrated |
Date closed: | 17th May 2017 |
Shariah advisors: | Shariah supervisory board of Abu Dhabi Islamic Bank and Dar Al Sharia |
Etihad Etisalat Company (Mobily) raised SAR7.9 billion (US$2.1 billion) via Tawarruq in a complex refinancing syndication that included export credit agencies. Bank Maybank Indonesia led the largest Shariah compliant financing ever for Indonesia with the IDR4.3 trillion (US$323.3 million) Musharakah with Perusahaan Listrik Negara (Persero), the national infrastructure development company. Abu Dhabi Islamic Bank also took on the capacity re-marketing challenge with National Central Cooling Company (Tabreed).
FINCO represented a creative approach to multi-source syndicated financing for the ongoing improvements at Dubai’s two airports Dubai International Airport as well as the Al Maktoum International Airport. In May 2017, FINCO launched its debut financing with a US$1.63 billion seven-year conventional syndication and an AED5.05 billion (US$1.37 billion) seven-year Ijarah/Islamic parallel syndication. The Ijarah facility is backed by a sub–Musatahah right. The final bank group consisted of 12 international and local banks which acted as joint mandated lead arrangers and joint bookrunners. The facilities were heavily oversubscribed by more than 50%, which is a continued demonstration of the support for the Dubai government initiatives and confirming the strength of the Department of Finance’s bank relationships and credit profile. The platform is flexible and allows for the piecemeal integration of multiple Shariah compliant financing products including Ijarah, Murabahah, Wakalah and various Sukuk structures. Honorable mention: Tabreed, Mobily and Perusahaan Listrik Negara (Persero) |
Trade Finance: Chad Industries Company (Abassi Group) | |
Deal size: | EUR5 million (US$6.12 million) |
Financier: | ITFC |
Lawyers: | In-house |
Guarantor: | Societe Generale |
Trustee: | GAFCO/Abbassi Group |
Rating: | Unrated |
Date closed: | June 2017 |
Shariah advisors: | Shariah supervisory board of ITFC |
In 2017, the ITFC led the way. As is their habit, they keep pushing frontier markets. Turkey too featured with important trade-related transactions for the Turkish Grain Board and Yildirim Holding.
Chad has not yet featured in the international Islamic market. Therefore, the ITFC’s facility to finance raw materials for Chad Industries Company’s production of carbonated soft drinks, bottled water, seasoning products and powdered milk features at the top of a well-contested group. Founded in 2012 by the Abbassi family, the company is seeking to move food processing to Chad. Chad is a land-locked country where trading is vital for the economy. Developing its own food processing helps to control the value chain. The transaction also supports the diversification of foodstuff producers within the country. The transaction is guaranteed by Societe Generale Tchad. The sales proceeds are deposited in a collection account in the local currency (XAF) and then transferred to the ITFC in euros. Honorable mention: Toprak Mahsulleri Ofisi (Turkish Grain Board) and Societe Burkinabe des Fibres Textiles |
Structured Finance: SkyWorld Capital | |
Deal size: | RM50 million (US$12.64 million) tranche under RM600 million (US$151.62 million) Musharakah program and RM41 million (US$10.36 million) under RM400 million (US$101.08 million) Murabahah program |
Arrangers: | NewParadigm Capital Markets and United Overseas Bank (Malaysia) |
Lawyers: | Adnan Sundra & Low for the arrangers |
Rating: | RM600 million (US$151.62 million) Sukuk Musharakah Islamic medium-term note program rated ‘AA3/Stable’ by RAM Ratings RM400 million Sukuk Murabahah Islamic commercial paper program unrated |
Guarantor: | Danajamin Nasional for the Sukuk Murabahah |
Date closed: | 8th December 2017 |
Shariah advisor: | Dr Mohd Daud Bakar |
There were a large number of structured transactions that tinkered at the margins with proven concepts such as Abu Dhabi Islamic Bank’s Wakalah structure based on Tabreed’s refrigeration capacity. There was also Dubai Islamic Bank (DIB)’s novel approach to work in progress finance via Mudarabah for PNC Investments.
SkyWorld Capital is a subsidiary and special-purpose funding vehicle for SkyWorld Development. The SkyWorld transaction goes beyond the Mudarabah concept tested by DIB and applies a hybrid structure. The Musharakah covers the work in progress elements whereas a Tawarruq wing covers working capital aspects of the project. The Musharakah note program is structured to participate in the affordable housing sector and allows SkyWorld to unlock capital relating to unbilled housing transactions. Proceeds from the Sukuk Musharakah are used to purchase the beneficial interest to the sales and purchase agreements signed in relation to the units in a development project and defray transaction expenses. As and when required, proceeds from the Sukuk Murabahah will be used to cover cost overruns and bridge any timing mismatch between progress billing receipts and ongoing construction costs under the development project, as well as any shortfall in the payment of the Sukuk Musharakah senior profits and senior expenses, including contingent fees. This landmark Islamic Sukuk transaction is a synthetic securitization of progress billings. The issuance is in support of a specific residential development project. Instead of the traditional approach of relying on the developer’s credit, this transaction focuses on the end user’s payments. Honorable mention: PNC Investments and National Central Cooling Company (Tabreed) |
DOTY Shortlist
Nearly 30 transactions were nominated for Deal of the Year. SOFITEX, Scatec and FINCO and many more acronyms represented new frontiers for Islamic finance. SOFITEX for bringing Islamic pre-export finance to a new country, Scatec for bringing new global parties to Egypt for solar finance and FINCO for introducing platform financing to the GCC.
New sovereigns like Saudi Arabia joined returning sovereigns like Oman and Indonesia. The former broke records while the latter two tweaked their models.
Technology was ever present. Delivery Hero acquired another Kuwaiti app. Parties in London, Riyadh, Dubai and Mauritius cooperated to launch Souqalmal.
Malaysia’s Sime Darby brought three landmark deals to bear. In a deleveraging exercise, the diversified corporation issued perpetual Sukuk and new shares. Sime Darby also entered the renewable and sustainable energy field.
The banks were hyperactive. Warba issued a Tier 1 Sukuk facility that accommodated the newness of the bank. Al Baraka Banking Group issued the first sub-investment grade Tier 1 capital Sukuk facility from the GCC, which was also the first Tier 1 Sukuk for a Bahraini Islamic bank.
Alternative energy was prominent. Real estate was somewhat less prominent. Several real estate nominations highlighted their greenness.
IFN Deal of the Year 2017: Shortlist
2017 was an exceptional year for the Islamic capital market, and there were numerous deals worthy of consideration for the final shortlist. This year, the winning transaction will be announced with due ceremony at the IFN Awards Gala held at the Ritz-Carlton DIFC on the 11th March 2018. The five included on this prestigious shortlist are:
Each of these transactions represented innovation, new players, and thinking out of the box. Each brought something new to the global and local Islamic finance markets and each has a worthy claim to the crown. However, only one deal can win the ultimate honor. Find out in March which deal came top for 2017. |
You do not mention where any of these issues are listed.