Mid-East aviation pavilion to debut at Farnborough

UAE-based banks took the lion's share in the recently concluded $400m Sukuk issue launched by the Islamic Development Bank (IDB).

The issue, which was lead-managed by Citigroup, is considered the first international Islamic capital markets bond issue by a non-sovereign issuer and only the second such international Islamic issue.

Citigroup also acted as ratings advisor and the sole bookrunner, with Abu Dhabi Islamic Bank (ADIB) and Kuwait Finance House (KFH) acting as co-lead managers. HSBC and Nomura were the co-managers for the issue.

The president of IDB Dr Ahmed Mohamed Ali lauded the support provided by the UAE for IDB since its inception and praised the strong interest shown by the UAE-based financial institutions including the UAE Central Bank in the Sukuk issue.

UAE financial institutions took over one-third of the Sukuk issue, which translated into approximately $150 million.

"It is projected that in order to maintain an annual growth rate of seven per cent in its operations, the IDB will have to raise no less than $4 billion over the next 10-years. In other words, the IDB will be going back to the market very soon," said Dr Mohamed Ali.

IDB has been cooperating with a number of central banks in member countries to develop an international Islamic financial market for the trading of Islamic financial instruments, which is a key requirement for the success and continuity of the Islamic banking industry.

The money recently mobilised from the Sukuk issue will go to a number of member countries to finance developmental projects in a variety of sectors, including energy, industry, communications and transportation.

Apart from the UAE Central Bank, central banks of Saudi Arabia, Malaysia, Pakistan, Bahrain, Qatar and Bangladesh took part in the Sukuk issue.

Shehzad Naqvi, regional director for Citigroup, emphasised the significance of this issue, given that it is the first ever AAA-rated issue by any borrower in the Organisation of Islamic Countries (OIC).

"We certainly would like to continue to work with the IDB, the central banks and finance ministries of OIC member countries and other key Islamic financial institutions to introduce innovative Islamic structures.

"We believe that the international financial institutions have a crucial role in promoting Islamic finance beyond its traditional borders," added Naqvi.

The IDB Sukuk issue was originally targeted for $300 million. However, due to strong demand from institutional investors, the size was increased to $400 million.