Business | Banking

MAF Holding raises $400m through sukuk

The bond issue was four times oversubscribed

  • By Babu Das Augustine, Deputy Business Editor
  • Published: 00:00 February 2, 2012
  • Gulf News

Dubai: Majid Al Futtaim (MAF) Holding LLC, sole franchisee of hypermarket chain Carrefour in the Gulf and operator of malls and hotels across the Middle East, raised $400 million (Dh1.47 billion) with its maiden sukuk (Islamic bonds).

The five-year sukuk was raised at 5.85 per cent. Majid Al Futtaim is rated the second-lowest investment grade of BBB by Standard & Poor's.

Considering the fact that the company is a non-government issuer tapping the sukuk market for the first time, analysts said the pricing is competitive.

"MAF did very well indeed to not only to launch a successful $400 million sukuk deal, but to also achieve a price which was lower than the guidance that had been provided. In our view the pricing of the deal was certainly helped by the positive sentiment built up over the last few weeks on Dubai Inc, and in this regard the timing of MAF's deal was excellent," Chavan Bhogaita, Head of Markets Strategy Department, Financial Markets Division of National Bank of Abu Dhabi, said.

The sukuk was four times oversubscribed with over 140 orders and features well-diversified investor participation.

Success story

The final distribution of the certificate was well-balanced with investors from Asia (14 per cent), Europe (32 per cent) and the Middle East (54 per cent). Banks accounted for 52 per cent, fund managers 42 per cent, and private banks the balance of six per cent.

"The success of our first sukuk issue demonstrates the strength of our credit story and its appeal to a broad investor base. The strong interest received from investors enabled us to raise the amount of funding, $400 million, which we had initially targeted. It represents a key undertaking for the continued growth of our business. We will continue to manage our funding profile proactively," said Iyad Malas, CEO of Majid Al Futtaim Holding.

This transaction represents MAF's first foray into the public debt market and allows it to fulfil its objective of strategically diversifying its sources of funding and extending its liability maturity profile.

Bankers and analysts said MAF's sukuk is likely to play the role of a catalyst on both the demand and supply side of sukuk market.

"It is quite rare to have a standalone GCC corporate [i.e. not a Government Related Entity] of this calibre issue paper, and in this regard it is likely to appeal to both regional and international fixed income investors," said Bhogaita.

"This transaction may encourage other such corporates to tap the debt capital markets, although investors are likely to be more receptive to those entities that have been through the credit ratings process and can demonstrate a strong level of transparency and corporate governance," said Bhogaita.

Gulf News
Retail Gold Rate
Business Editor's choice