Kuwait Finance House (KFH) has issued a $500m sovereign sukuk in South Africa, the first in the country, through its Investment arm KFH-Investment, enlisting the novel product on the Luxembourg Stock Exchange with a period of 5 years and 9 months.
The issuance, a debt sukuk at the level of the continent, has an expected return of 3.9%, representing a spread of 180 basis points above the corresponding mid-swap rate, while global rating agencies Moody’s, Fitch and Standard Poor’s issued credit investment ratings ranging from BAA- to BBB.
The product was also 300% oversubscribed, generating an order book total of $2bn from 130 regional and global accounts, following rounds of meetings between KFH and investors in Europe, Asia and the Middle East alongside BNP Paribas and Standard Bank.
“KFH’s leadership of sukuk issuance in South Africa confirms its capability to open new markets and attract clients, whether governments or companies, to the sukuk market” said Hamad Abdul-Muhsen Al-Marzouq, chair of the board at KFH.
Al-Marzouq detailed that representatives of the Republic of South Africa focused on the promotion of the sukuk to the GCC countries, and that over 59% of investors were from the Middle East and Asia.
He continued by noting that KFH has worked extensively with the government of South Africa to create appropriate regulations in the lead up to the issuance, and expressed his confidence in the construction of the legislature in South Africa.
KFH also participated in the $750m debut sukuk for the emirate of Sharjah this month, where its product witnessed 900% oversubscription and an order book total of $7.8bn from 250 accounts, reflecting the strength of the demand for Islamic finance within the Gulf as much as outside.
However, given the position occupied by the South African economy, the country presents one of the most significant markets for the transformation of conventional bonds into sukuk, and the $500m issuance adds welcome diversity to the existing financial resources on the continent.
Al-Marzouq added that the sukuk issuance was the third of its kind for non-Muslim countries after the sukuk issued by the United Kingdom and lately Hong Kong.
It would appear that KFH also outmaneouvred Bahrain’s Al Baraka Bank, which revealed that it was exploring sukuk opportunities in South Africa back in May.
Established in 1977 and listed on the Kuwait Stock Exchange, KFH is a global pioneer in the field of Islamic banking services, manages 375 branches the GCC, Asia, and Europe.