Sale of Sharjah’s first sukuk is 10 times oversubscribed

11/09/2014 00:46 AST

Sharjah sold a 10-year US$750 million sukuk today, the first capital market debt sale for the emirate. It attracted orders from investors 10 times greater than what was on offer, amid strong demand by international investors for bonds from the economically buoyant UAE.

The sukuk, which matures in 2024, has a profit rate of 3.764 per cent and attracted orders of $7.85 billion, the government said. The emirate is issuing the sukuk with an ijara structure and it will be listed on Nasdaq Dubai and the Irish stock exchange.

Sharjah, which has a population of about 1 million, boasts a $22bn economy and is keen to bolster its manufacturing base and to attract more tourists. Demand for bonds from the UAE has increased in recent years as Dubai recovers from its debt crisis, and because the country’s peg to the dollar makes it stand out in emerging markets where most currencies have been volatile over the past year.

This demand has lowered the yield investors get and has made it attractive for companies, banks and governments to go to the bond and sukuk market to raise cash.

“Accessing the debt capital markets through a debut sukuk issuance meets a number of important objectives,” the government of Sharjah said. “From a financial perspective, the transaction has helped the government to diversify its investor base, access longer fixed-term tenors and optimise pricing. From a wider economic perspective, the issuance will provide a benchmark for any transactions undertaken by Sharjah entities in both the wider public sector and the private sector. It will also enhance the efforts of the UAE authorities to develop the local financial markets.”

HSBC assisted Sharjah as the so-called global coordinator for the transaction, with KFH Investment, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered alongside as joint lead managers. Al Hilal Bank, Dubai Islamic Bank and Arab Banking Corporation were appointed as co-lead managers for the transaction.

Sharjah is rated A/A3 by Standard & Poor’s and Moody’s Investors Service.

The National