UK strengthening GCC ties prior to debut Islamic bond
Britain to sell $335m of sovereign sukuk backed by govt property
dubai — The UK is strengthening ties with members of the Gulf Cooperation Council before issuing its debut Islamic bond, three years after it abandoned a sale.
A framework accord signed last week with Bahrain to “enhance collaboration” in Islamic finance, follows visits from foreign office minister Sayeeda Warsi and the Lord Mayor of the City of London to the region. A Qatari Islamic bank representative also met the minister in London as the UK prepares to sell £200 million ($335 million) of sovereign sukuk backed by government property this financial year.
The UK wants to become a global center of Islamic finance, hoping to secure a slice of an industry growing at 17 per cent a year and set to be valued at $2.7 trillion by 2017, according to PricewaterhouseCoopers.
The government has weighed the sale of Islamic bonds since at least 2007 and canceled a planned issue in 2011 because it was “judged not to provide value for money.” Rizwan H Kanji, Dubaibased partner at law firm King & Spalding LLP, said: “By really strengthening these relationships, they’re raising the certainty that the sukuk sale will be a success. If you look at who the big investors in sukuk are, they’re in the GCC countries. It makes sense to line-up friends in those jurisdictions.”
The UK treasury appointed HSBC Holdings and Linklaters LLP as advisers to the planned sale, according to a April 1 statement. The treasury press office did not immediately respond to an e-mail seeking comment.
About one third of all Islamic bond sales so far in 2014 came from the six-nation GCC, according to data compiled by Bloomberg.
“The outreach we have seen is definitely designed to ensure smooth uptake of the upcoming
Outreach we have seen is definitely designed to ensure smooth uptake of the upcoming sukuk
Emad Mostaque
sukuk, particularly as it is likely to attract interest from Gulf stateowned enterprises looking to diversify their treasury exposure,” Emad Mostaque, a London-based strategist at Noah Capital Markets, said by e-mail on Sunday.
Global Islamic bond sales fell to $10.6 billion in the first three months of the year, data compiled by Bloomberg show, the worst start since 2011, as slower growth in China cast doubt on the economic recovery and crises from Turkey to Ukraine roiled developing-nation assets. The UK in 2011 pledged to “keep the situation under review” when it decided not to issue a sovereign sukuk because the deal didn’t offer value for money. There’s no guarantee a sale will go ahead this time because the cost of borrowing always remains uncertain, Kanji said.
The memorandum of understanding signed by the UK’s Warsi and Bahrain’s central bank Governor Rasheed Al Maraj set out plans for a working group on Islamic finance-driven trade and investment, according to an April 8 statement.
Warsi visited the GCC in September, while City of London Lord Mayor Fiona Woolf visited in February. The chief executive officer of Qatar International Islamic Bank met Warsi in London last month, Qatar’s Peninsula reported on March 26. “The UK credit is well known and many investors already buy its sovereign conventional paper,” said Michael Grifferty, president of the Gulf Bond & Sukuk Association. “This sale will enjoy very strong demand including in the region, if only on the scarcity of the paper.”