Bumper sukuk listed

MANAMA: The size of the Bahrain bond market increased by almost 50 per cent yesterday with the listing of a $1 billion Saudi sukuk on the Bahrain Stock Exchange. The listing, the largest ever on the Bahrain exchange, was hailed as a landmark in the development of Islamic finance by stock exchange director Fouad Rashid.

The addition of this sukuk by real estate company Dar Al Arkan to the Bahrain market brings the number of bonds and sukuk traded in Bahrain to 16 with a total value of $3.2bn. "This is truly a landmark event in the history of the Bahrain Stock Exchange and represents a further important milestone in the development of the Islamic capital markets," said Mr Rashid.

"We look forward to continuing to work with the region's leading corporates and financial institutions to expand the boundaries of the Islamic finance industry," he added.

"We are delighted to have the opportunity to list our second sukuk issue on the Bahrain Stock Exchange," said Dar Al Arkan managing director and board member Abdullatif Al Shalash.

"The truly international nature of this sukuk and the overwhelming response from investors affirms the strength of Dar Al Arkan's business model, our strong growth prospects and the confidence of the international financial community in our strategy.

"Dar Al-Arkan is committed to playing a leading role in providing affordable housing solutions that meet international standards for middle income families across the kingdom of Saudi Arabia."

The sukuk has already been listed on the Dubai International Exchange and Malaysia's offshore Labuan International Financial Exchange.
Mr Al Shalash said the company had been in talks with the Saudi stock market about a possible listing but there were problems with the fact that the issuer of the bond was registered in the Cayman Isles.

He said that at present people tended to hold onto sukuk until they matured as investors had difficulty in finding alternative Islamic assets to invest in but that this would change as the Islamic finance industry grew and matured.

Closed in July last year, the five-year sukuk issue, based on an Ijara structure, will mature in 2012 and pays an annual return of 2.25pc above Libor payable to the sukuk holder every three months. It is the second sukuk to be issued by Dar Al Arkan, a residential real estate developer in Saudi Arabia.

In March last year, the company closed its inaugural sukuk at $600 million, marking the first sukuk to be issued by a Saudi corporate in the international capital markets. The inaugural Dar Al Arkan sukuk is listed on the Dubai International Financial Exchange.

Dar Al Arkan recently announced the successful close of its initial public offering on the Saudi Tadawul All Share Index which saw the company's founding shareholders dilute their existing shareholding by 11.01pc, equal to a total of 59,454,000 shares.

The initial public offering was largest non-governmental listing in Saudi history and was significantly oversubscribed, attracting a great deal of interest from a wide spectrum of investors.