Raising finance through a sukuk can be a key contributor towards Turkey’s long-term funding requirements in the global sukuk market that took place recently was the launch of a three-year $100 million Wakala sukuk on August 23, by Istanbul-based Kuveyt Turk Participation Bank, in which global Islamic banking major, Kuwait Finance House, or KFH, has a controlling 62 per cent equity stake.
The sukuk was launched in Istanbul at a ceremony attended by Mehmet Simsek, Turkish minister of finance, Mohammed Al Omar, the CEO of KFH, and Ufuk Unan, the CEO of Kuveyt Turk Participation Bank.
Citigroup Global Markets and Liquidity House, a subsidiary of KFH, were appointed the joint lead-arrangers for the issuance. The sukuk, issued by KT Turkey Sukuk Limited, a special purpose vehicle incorporated in the Cayman Islands, has a yield of 5.25 per cent fixed and is rated BBB- by international rating agency, Fitch Ratings.
The sukuk, which was over-subscribed 45 per cent, has an asset pool comprising a mixture of Murabaha and Ijara (leasing) receivables, with not less than 51 per cent derived from Ijara contracts. The sukuk is issued under English law as the governing law and will be listed on the London Stock Exchange.
Experts believe that the Kuveyt Turk Sukuk should now pave the way for a possible sovereign Turkish issuance later this year or in early 2011. Kuveyt Turk is a well-established Turkish Islamic bank that has led the sector through several product innovations over the last few years. It is one of four Turkish participation banks, the authorised title given to Islamic banks licenced in Turkey. The other three include Turkey Finans, which is majority owned by Saudi Arabia’s National Commercial Bank; Albaraka Turk Participation Bank, a member of the Bahrain-incorporated but Saudi-owned Albaraka Banking Group; and Asya Bank.
Al Omar emphasised that interest in sukuk, which has recently gained popularity as a way for many governments, financial institutions and companies, from Europe to the Far East, to raise funds from international markets, had risen rapidly all over the world in the last ten years.
'We’re now watching these instruments gain more ground once again. A total of $120 billion sukuk were issued in the last ten years. Issuing Sukuk has been on Turkey’s agenda for many years. We hope that this new issuance serves as a model to encourage other financial institutions and corporations in their efforts to launch new sukuk. In this respect, a new financial product with all its benefits and advantages will be added to the Turkish economy. This issuance is considered a highly significant development for foreign investors looking to purchase interest-free products. Consequently, if this product attracts wider foreign investments, more funds from global markets will flow into Turkey, as the Gulf region takes the lead,” he added.
Uyan said that raising finance through sukuk issuance can be a key contributor toward Turkey’s long-term funding requirements. He added that Kuveyt Turk will go to the market with further issuances.
“We are issuing a sukuk of $100 million initially. We are considering increasing this amount in the future depending on the results and assets obtained. In line with our vision for the future, our aim is to sustain our innovative approach and provide our customers with new products and services in interest-free banking,” he said.
Views expressed by the author are his own and do not reflect the newspaper’s policy.
Source : http://www.khaleejtimes.com/biz/inside.asp?xfile=/data/business/2010/November/business_November148.xml§ion=business&col= - Nov 5, 2010
