JEDDAH - Saudi Aramco and France’s Total will launch $1 billion Islamic bond (Sukuk) in the Q4 to build 400,000 barrels per day crude refinery in Jubail.
Simon Eedle, global head of Islamic banking at Credit Agricole, said the long delayed $1 billion Sukuk which was part of the financing for the Jubail refinery will launch in the Q4. Credit Agricole, Deutsche Bank and Samba Financial Group are the lead arrangers for the Sukuk.
The Jubail refinery, 62.5 percent owned by Saudi Aramco and 37.5 percent by Total is scheduled to begin operating in 2013 and is among the new plants planned by Saudi Arabia as it looks to boost domestic refining capacity. Last year, it was estimated that the Jubail refinery could cost more than $12 billion and funding for the project may include an Islamic bond portion to meet demand from Saudi investors.
Eedle said the larger Gulf Sukuk market will likely see at least $10 billion in issuances, led by financials in the next 6 months. Most issuances will come from high credit quality markets such as Abu Dhabi, Qatar and Saudi Arabia.
He said that we know that there are plenty of deals mandated in the region and deals to be won. He added that the time is also right for Sukuk issuances outside of the Gulf region and he expects more investment money from the West to tap the Islamic finance market in 2011.
Global Islamic bonds are poised to extend gains after climbing to a record this week, buoyed by Asian economic growth and a pickup in Gulf issuance.
Gulf sales of Sukuk, which pay asset returns, are rising after Dubai World reached an agreement with creditors last month to change terms on $24.9 billion of debt. Companies in the region plan to issue about $5.8 billion of Islamic debt in the fourth quarter, the most for the period in three years.
Islamic Development Bank, a Jeddah-based multilateral lender, plans to sell $1 billion of bonds this quarter under a $3.5 billion Sukuk program, Vice President Abdul Aziz Al-Hinai said Aug. 24.
“The flurry of new issues in the Gulf Cooperation Council, both Islamic and non-Shariah-compliant, has lifted sentiment generally,” Naji Nabaa, a Dubai-based associate director of fixed-income sales for the Middle East and North Africa at Exotix Ltd., an investment bank specializing in illiquid assets, said on Thursday.
“Spreads have further room to tighten in Dubai,” Ahmed Talhaoui, the head of portfolio management at Royal Capital, which is 44 percent owned by United Gulf Bank, an investment bank in Bahrain, said. “There is no sign that we’re overheating in terms of bond issuance in the region.”
The pickup in issuance is likely to continue as the pace of economic growth in the GCC nations gathers momentum, according to BNP Paribas Investment Partners, which manages $700 billion and is the asset management unit of France’s biggest lender.
“We feel that the Gulf Cooperation Council region represents very good value and Asia remains on very solid ground,” Rafael Martinez Dalmau, head of Shariah-compliant portfolio management at BNP Paribas in Singapore, said Wednesday. “We are seeing a constructive resolution of the regional corporate restructurings.”
Global sales of Sukuk fell 22 percent to $11.8 billion so far this year from the same period in 2009, according to data compiled by Bloomberg. Issuance totaled $20.2 billion last year, up from $14.1 billion in 2008.
Investors poured a net $1.5 billion into emerging-market bond funds in the second week of October, bringing year-to-date inflows to $41 billion, according to a report from EPFR Global, a Cambridge, Massachusetts-based research company.
The HSBC/NASDAQ Dubai US Dollar Sukuk Index, which tracks 23 sovereign and corporate securities that comply with the religion’s ban on interest, climbed to 124.47 on Oct. 11, the highest level since its inception in 2005. The notes have returned 12.4 percent so far this year after a gain of 20 percent in 2009 and a 19 percent loss in 2008. Asia’s developing economies will expand 9.4 percent in 2010, compared with growth of 2.7 percent in advanced countries, the International Monetary Fund forecast on Oct. 6.
– Saudi Gazette/Agencies