$1bn Abu Dhabi islamic bond healthy for capital markets
Posted on 14 October 2009 with no comments from readers
Islamic finance took another step forward today. HSBC Amanah acted as lead manager for the first sukuk to be issued by an Abu Dhabi government entity, a $1 billion, Sukuk Al Ijara for Abu Dhabi’s Tourism Development and Investment Company.
The five year, $1 billion sukuk was priced at 230 basis points over mid swaps and was almost seven times oversubscribed.
Global participation
By region, the distribution was: Middle East 60 per cent; Asia 20 per cent; Europe 20 per cent. Investor breakdown: banks and treasury 48 per cent; asset managers 21 per cent; central banks 15 per cent; private banks 14 percent; others two per cent.
TDIC is responsible for the development of Abu Dhabi’s high profile cultural projects such as the flagship Saadiyat Island, which will house the Zayed National Museum, the Louvre Abu Dhabi, the Guggenheim art gallery, a performing arts centre and a maritime museum. These projects are part of a comprehensive economic development plan for the emirate.
Mohammed Dawood, Director of Debt Capital Markets, HSBC Amanah, commented: ‘The TDIC sukuk is significant for a number of reasons: it is the first sukuk ever to be issued by an Abu Dhabi government entity, and the largest non-sovereign sukuk to be issued from the Gulf region during 2009.’
The demand for shariah compliant investments is vast, particularly with a sovereign guarantee and blue-chip lead manager.
Abu Dhabi does not need to borrow money. Per capita the emirate is the world’s largest net creditor. But the development of a local bond market is increasingly seen as necessary to widen and deepen local capital markets.
Easing liquidity
In the past the emirates functioned without a government bond market and simply invested money from oil revenues in national development projects. But this has always left open the danger of a liquidity squeeze.
Creating a strong UAE bond market for government debt should support a higher level of infrastructure investment while at the same time allowing Dubai to refinance the debt it has run-up in the recent property boom at low-cost.
This is something that bankers have long recommended for the UAE and marks something of a coming of age for islamic banking.
