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Demand for Sharjah sukuk tops US$7 billion

The launch of the Government of Sharjah’s debut sovereign Islamic bond issue or sukuk has been met by massive demand from investors. The 10-year US dollar sukuk was launched at a size of US$750 million (AED 275b) on Wednesday, securing orders worth about US$7.85 billion (AED 29b).

Sharjah has secured global investor attention this year, after receiving its first sovereign credit ratings from Moody’s Investors Service and Standard and Poors in January: both rating agencies giving the government an A-class economic rating with a stable outlook.

During the past two weeks, Moody’s assigned a provisional rating of (P)A3 to Sharjah’s sovereign sukuk, citing the emirate’s strong fiscal and government debt position and the benefits it receives from Sharjah’s membership in the United Arab Emirates.
Tuesday’s investor guidance statement estimated demand for the US dollar Islamic bond issue, which uses an ijara structure, to be in excess of US$4 billion (AED 15b). However, the sovereign bond issue received orders approaching double the level of demand initially estimated from around 250 investors from around the world. According to a government statement, orders were received from high-grade global and regional investors, including central banks, fund managers, insurance companies and banks from across Asia, Europe, the Middle East and offshore US jurisdictions.

Final price guidance on the bond was given by the sukuk’s appointed lead arrangers at 110 basis points (bps) over midswaps (a benchmark for calculating bids). This pricing guidance is significantly tighter than the 120 bps over midswaps guidance provided on Tuesday, due to strong demand. HSBC, Kuwait Finance House, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered are acting as lead arrangers for the transaction.

Sharjah is now the fourth member of the UAE to use Islamic bonds. Moody’s expects US$30 billion (AED 110b) of sovereign sukuks to be issued this year, out of a total of US$70 billion (AED 257b) of Islamic bonds that are expected to be issued by the end of 2014.

*Updated 1850 hrs GST 10 September 2014

Source: news media, Reuters, Government of Sharjah

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