LOLC Finance sets the benchmark in Sukuk issuances in South Asia

LOLC Finance PLC has successfully issued a Rs. 500 million (US$3.37 million) Sukuk from the domestic market, setting a precedent for corporate Sukuk issuances in South Asia.

Sukuk is commonly referred to as ‘Sharia’h compliant’ bonds which is a fast emerging source of alternative funding often referred to as Islamic Bonds, the company said in a media release.

The Sukuk Al Ijarah issuance of LOLC Finance was subscribed entirely by the Bank of Ceylon. The three-year Ijarah facility proceeds will contribute to further develop the Islamic Finance capital market, by not only opening a new window for companies seeking Islamic Finance but also provide a viable investment instrument for any potential Islamic investor. The Trustee to the issuance was HNB Custodial Services while Trillion Securities (Pvt) Ltd acted as the financial adviser, arranger and lead manager.

Elaborating on Sri Lanka’s first Sukuk Al Ijarah issuance, Krishan Thilakaratne, the Group Head of Islamic Finance of LOLC said, “As there has never been a Sukuk issuance in Sri Lanka, we had the challenge of drafting the agreements and arranging the parties. Further, we are building a fairly substantial Ijarah base and we have the capacity to go with a larger issue in the future. Ideally, we would like to get off shore investors buying the paper but there are hurdles to overcome such as exchange risk options.

Speaking about the landmark deal, D.M Gunasekera, General Manager of Bank of Ceylon (BOC) said, “The experience and the learning curve of this joint effort is one of the convergence the industry is vying for and therefore others too can join hands with us for win-win deals”.

Sampath Kulatunga, Director / CEO of Trillion Securities (Pvt) Ltd (TSL), the arranger and lead manager of the issue said, “The challenge to us was that this issue was the first ever Sukuk Ijarah receivable securitization transaction, structured in the Sri Lankan capital market. The first ever Sukuk Ijarah securitization transaction became a reality due to the effort of all stakeholders who worked tirelessly to ensure the successful launch of this issue”.