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Securitization Finance to Take Off in Mideast

LONDON, 27 August 2007 -- Kuwait-based Rasameel Structured Finance , the GCC region's pioneering asset securitization company, is embarking on an ambitious expansion plan in the GCC countries and Asia, as securitization and structured finance is set to take off in the Middle East.

According to Issam Al-Tawari, CEO of Rasameel , the company is in the process of setting a subsidiary in Bahrain, aimed at marketing and selling down securitization and capital markets products to investors and institutions in Saudi Arabia, Qatar, UAE and Bahrain. It is also establishing a regional hub in Kuala Lumpur to explore opportunities in Malaysia, Singapore, Indonesia, Brunei and beyond.

Looking ahead, Al-Tawari said "our focus will be on the operational bases and participating in setting the legal and organizational frameworks that enable us to expand in securitization and structured finance activities on the local and GCC levels and beyond. Moreover we will participate in international transactions and cooperate with mega international institutions to solicit innovative investment opportunities. We will support our participation in developing the Islamic investment industry as well as national economies."

For the fiscal year ending March 31, 2007, Rasameel last week announced KD1.21 million of net profits which translates into a profit rate of KD4.03 per share. In a space of its first year, total assets have increased to KD31.54 million. Shareholders' equity tops KD31.22 million.

The company was established in January 2006 with a paid-up capital of KD30 million. It is incorporated in Kuwait as a Kuwait Shareholding Company KSC, which is licensed and regulated by the Central Bank of Kuwait (CBK).

Its shareholders include some of the big players in Kuwait, UAE and Saudi Arabia, including Gulf Investment Corporation , The Commercial Bank of Kuwait , Abdullatif Al-Essa Group in Saudi Arabia, Sharjah Cement & Industrial Development , UAE, Al-Dar Asset Management and Kuwait Investment Company .

"Our line of business is unique under our articles of association and license, in that it says that we can be engaged in Tawreeq (securitization) of assets," stresses Al-Tawari. Indeed in March 2007, Rasameel organized the first securitization forum in Kuwait in cooperation with the ministry of commerce.

Recently also, Rasameel together with an un-named international investment bank, earlier this month won a mandate from Qatar Islamic Bank ( QIB ), the largest of the three Qatari Islamic banks in terms of capital and assets, to review QIB 's asset pool and to advise which parcels of assets are ideal for securitization. The transaction would be the first such one in Qatar and the first securitization for a financial institution in the Middle East, whether conventional or Islamic.

According to QIB Chief Executive Officer Salah Jaidah, the aim is to sell down the securitisation to the Qatari market, subject to the approval of the Qatar Central Bank and the Shariah Board of QIB . Securitization business in Qatar is still underdeveloped largely due to the lack of legal and regulatory infrastructure to facilitate such products. But under QIB 's 5-Year Plan, the bank plans to diversify its product offerings in debt and capital market instruments.

Securitisation in the GCC is a relatively new market, but the potential is huge given the surfeit of quality real estate asset pools being developed. "The market in the GCC wants to see something new, especially in alternative forms of financing, " Al-Tawari explained. "Investors are seeking other opportunities which are yielding returns more interestingly, but with better risk security than say equity investments. Rasameel is looking at asset pools such as consumer receivables (financing through Ijara leasing); car and fleet leases; home mortgages; and aircraft leases."

The market for consumer receivables in Kuwait alone totals in excess of KD5.5 billion, of which KD4.5 billion is for conventional receivables and KD1.5 billion for Islamic receivables. As such, Kuwait is a potentially huge market for securitization. Saudi Arabia, Qatar and the UAE are potentially even bigger markets for securitization and alternative fixed-income products. "Even with a capital of KD30 million, if we leverage it four times, there is ample size for growth. We want to start from Kuwait, but over time we want to be the securitisation company for the region. We have seen many opportunities," Al-Tawari said.

During the last year, Rasameel co-arranged a $30 million Sukuk for Kuwait Commercial Companies Complexes; a KD10m financing facility for Burj Hajar Company in Saudi Arabia; and acted as financial adviser to Abyaar Real Estate development Company for projects in the UAE.

There are several reasons why securitization and alternative fixed-income instruments are set to take off in the GCC. The huge surplus liquidity in the region is chasing more value-added products. Even high net worth investors (HNWI) are constantly demanding more sophisticated investment products to the usual suspects with a greater range on the risk-reward spectrum. GCC institutions and investors are also now increasingly willing to underwrite such products.

"We are looking at various opportunities. We have to drive the mindset of our clients to make them aware of new solutions coming to the market."

By Mushtak Parker

© Arab News 2007

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