DIFC Investments Issues Landmark Sukuk

by Lorys Charalambous, Tax-News.com, Cyprus

11 June 2007

DIFC Investments LLC, the investment arm of the Dubai International Financial Centre (DIFC), has announced the issue of a US$1.25 billion Sukuk, the highest rated and the largest Straight Sukuk to come out of the region.

The 5-year Sukuk, the first one to be entirely documented under DIFC Law, attracted a high level of international participation, with 67% of the Sukuk’s subscription originating outside the region. The success of this first issue from DIFC Investments illustrates investor confidence in the jurisdiction of the DIFC, the dramatic growth in Islamic Finance globally and opportunities arising from Dubai’s economic development. Of the US$1.25 billion, 20% comes from Asian investors, 47% from European investors and 33% from investors in the Middle East. The total breakdown was 54% to banks, 35% to fund managers, 7% to central banks and government agencies and 4% to insurance and pension funds.

Commenting on the issue, DIFC Governor Dr Omar Bin Sulaiman said: “This landmark issue exemplifies the DIFC’s mission to be a catalyst for economic growth, development and diversification. The interest shown in this Sukuk illustrates Dubai’s stature as an internationally recognized financial centre and a global leader in Islamic Finance.”

Bisher Barazi, Managing Director, DIFC Investments, added: “We were overwhelmed with the level of demand in each of the financial capitals we visited and the diversity of the international participants. As a result we increased the size of the issue from our original plans. We appreciate the trust and confidence our investors have shown in the DIFC.”

The DIFC Investments’ 5-year al-Mudarabah Sukuk is a floating rate note which pays a profit participation rate of US$ LIBOR + 37.5 basis points (bps).

Bin Sulaiman went on to note that: “This pricing reflects both the strength of the DIFC and the Sukuk’s credit rating.”

The Sukuk received ratings of “A1” from Moody’s and “A+” from Standard & Poor’s.

Roadshow stops included: Kuala Lumpur, Singapore, London, Geneva, Zurich, Dubai, Abu Dhabi, Bahrain and Riyadh. A total of 80 investors attended either one-on-one or group meetings.

The initial price guidance was released on Monday 4 June as “low to mid 40s over LIBOR” with an indicative “benchmark size”. A total of US$1 billion of orders were confirmed on the first day. The order book then grew steadily until it exceeded US$2 billion on Wednesday 6 June. The Sukuk was launched and priced as a US$1.25 billion issue with a profit rate of US$ LIBOR + 37.5 bps.

Deutsche Bank AG and Goldman Sachs were Joint Lead Managers and Joint Bookrunners. The Co-Managers were CIMB Berhad, Dubai Islamic Bank PJSC, Emirates Bank International PJSC, Emirates Islamic Bank PJSC, Mashreqbank psc and National Bank of Dubai PJSC. Rothschild acted as financial adviser to DIFC Investments on the Sukuk issue, whilst Linklaters LLP acted as legal adviser to the Issuer and Allen & Overy LLP acted as legal adviser to the Lead Managers.

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