Direct subscription to Sukuk Al Ijara begins

11/01/2015 07:37 AST

Bahrain Bourse (BHB) has announced that from today investors can directly subscribe to the Government Islamic Lease Securities (sukuk) in the primary market through registered brokers at the bourse.

The subscription period through the registered brokers is until Wednesday. The listing of the issue is expected to take place on January 25.

Thereafter, investors will be able to trade in the secondary market at BHB.

Islamic lease securities (Sukuk Al Ijara) are instruments representing assets owned by the Bahrain government (land in Zallaq).

The securities are issued by the Central Bank of Bahrain (CBB) on behalf of the government for the purpose of creating new opportunities for the investment of surplus financial resources in the economy and to provide a method of financing the expenditure and needs of various development projects.

In issuing these lease securities, the government sells an asset to the investors who will buy and own it before renting back to the government at a predetermined rental rate, via a rental contract.

The government will also issue a binding promise to buy back the asset at its par value at the end of the rental period.

The BD100 million securities will be issued at a par value of BD1 each on January 19 for a period of 10 years ending on January 19, 2025.

The returns (rent) on these securities will be paid every six months on January 19 and July 19 every year throughout the period of this issue.

The annual rate of return will be 5.50 per cent.

The government directly guarantees the Islamic lease securities via its binding promise to buy the asset at its original (par) value at maturity. It also guarantees to continue renting the asset according to the rental contract until the end of the rental period.

Bahrain Bourse has decided to exempt the charges related to account opening for the purpose of purchasing of government sukuk issued by CBB during January.

It is worth mentioning that one of the main advantages of subscribing through Bahrain Bourse is the ability to own sukuk directly (beneficiary ownership).

Moreover, to encourage retail investors, the bourse has determined a minimum subscription of BD500 (500 sukuk).

BHB has also determined a minimum allotment of 10,000 sukuk per subscriber applying for an amount of BD10,000 and above, while the remaining quantity will be allocated on pro rata basis.

Upon listing of the sukuk, investors will be able to trade them in the secondary market through a registered broker at BHB during the trading session which is held daily from Sunday to Thursday from 9.30 am until 1pm.

The applicable commission of subscribing and trading of sukuk is set to 0.08pc of each transaction, however the commission will remain negotiable between the broker and the investor.

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