Kuwait Finance House “KFH” represented by its subsidiary, Liquidity Management House “LMH”, succeeded in arranging for Ijarah Sukuk for the Turkish Treasury amounting USD1.5bln for 5 ½ years, in cooperation with Citigroup and HSBC, where this is the first issuance of its kind for the Government of Turkey.
The deal was signed by the CEO of KFH and Chairman of KFH – Turkey, Mohammed Al-Omar, and the Vice Chairman and CEO of LMH, Mr. Emad Al-Monayea. The issuance witnessed a large turnout exceeded expectations. 250 investors have requested to participate in the issuance totaling USD7.1bln (i.e. 5 times oversubscription coverage). This reflects the great confidence in the Turkish economy, and in those who lead the issuance process. Furthermore, it reflects the confidence of the global financial markets in sukuk product.
This typical issuance is a fruit of cooperation between many entities, particularly the Turkish Treasury that exerted great efforts to develop legislative and regulatory frameworks for the issuance of this sukuk and other instruments. Furthermore, if the government of Ankara wishes any further issuance, now it has a clear and steady legislative building could enables Turkey to become an important and prominent market for sukuk issuance. Thus, Turkey will benefit from the high demand for this product from investors in the region and the whole world.
In this regard, KFH expresses through its subsidiary LMH its readiness to assist the governments wishing to introduce sukuk, which are considered the Shara’i alternative to bonds, to their economic systems. They also can benefit from the advantage of the high financing capacity of sukuk in promoting the national economy and providing alternative funding.
The annual rate yield on these sukuk is 2.8% and to be distributed every 6 months. As for the geographical participation, the largest share is coming from the Middle East with 58%, followed by Europe (13%), then Asia (12%), Turkey (9%) and USA (8%).
As for the investors’ type, the largest share is for banks (59%) followed by asset managers (22%). Moreover, international institutions and central banks formed 10%, then wealth managers (5%), and finally hedge funds (4%).
LMH in 2010 arranged in coordination with Citigroup first Sukuk issuance in Turkey of USD100mln for the benefit of KFH – Turkey, a bank operating in Turkey and KFH owns 62.4% of the bank’s share. Furthermore, LMH in cooperation with HSBC and Standard Chartered Bank has arranged for sukuk issuance for KFH-Turkey in 2011 amounted USD350mln.