Muscat: Several Omani companies, including financial institutions, property developers and oil firms, are exploring the feasibility of floating Sukuk issues, with the new regulation on Sharia-compliant bond instrument in place.
This is in line with global trends where GCC states along with Malaysia, Indonesia, Turkey, Singapore and Pakistan, have issued $11.1 billion worth of Sukuk in the first three months of 2016. These states are choosing to issue more of their debt as Sukuk rather than conventional bonds. These countries issued 39.3 percent of their debt as Sukuk - the highest ratio of Sukuk to conventional debt in eight years, based on data from Fitch Ratings.
“We have had increased consultations with companies wanting to issue Sukuk. Some of them had wanted to wait until the regulation was out before proceeding,” Kemal Rizadi Arbi, Advisor at the Capital Market Authority, told the Times of Oman. These companies are planning to float Sukuk issues to raise funds from the market.
Kemal said the new regulation allows for the issuance of a Sukuk programme, unlike in case of bond issuance. This means that with a base prospectus and upfront approval from the CMA, a company will be able to determine the timing, amount and pricing of the Sukuk to be issued, based on the company’s funding and operational needs, and not required to issue the whole Sukuk amount all at once and this, not incurring the whole cost upfront. In addition, the new regulation allows not just SAOG and SAOC companies, but also LLC firms with a good track record to raise funds by way of a Sukuk.
Elaborating on the advantages of Sukuk over bonds, he said companies may even get better pricing in terms of their funding cost, due to greater demand and a wider investor base of both conventional and Sharia-compliant investors globally, while attracting required foreign investments into the country. “In the existing bond framework, there are some restrictions. For example, you cannot raise bonds beyond the company’s capital.”
Also, Kemal said, the regulatory authority has introduced a trust structure in the new regulation in line with other international jurisdictions, making Oman one of the few GCC countries to have this. It allows a trustee to hold assets on behalf of the Sukuk holders. In addition, there will not be any restrictions on the Sharia structure of the Sukuk, subject to the respective Sharia Supervisory Board (SSB) approval of the issuer. The choice of the SSB is left to the issuer. The new regulation also allows the incorporation of an LLC as a Special Purpose Vehicle (SPV) and provides an optional rating requirement. All these have been drafted to provide flexibility and spur market players into innovation.
He said the issuance of the country’s first sovereign Sukuk and development bonds by the government will help build a yield curve for the country in order to create a pricing benchmark for issuers and to enhance secondary market activities. “Nevertheless, there needs to be continuous issuances with different maturities, not only by the government but also by government-related entities and financial institutions, to develop this market further.”
Sukuk forms an important element to further enhance Oman’s Islamic financial market and enable the capital market to play its vital role as a fundraising platform for companies, while diversifying the financing base and risk away from the traditional banking sector.
"The issuance of this new Sukuk regulation is another important milestone and will lay the foundation to spur further development of the Sukuk market and capital market for the economic development of Oman,” Kemal said.
(Times Of Oman / 24 April 2016)
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
No comments:
Post a Comment