The Gulf Co-operation Council (GCC) conventional bond and sukuk issuance market has experienced noticeable growth over the last two years with sukuk issuances becoming more prominent. Some of the key drivers to this growth include a ready pool of untapped Islamic liquidity, an increase in corporate offerings to refinance debt obligations and expand operations, the threat of rising borrowing costs due to the effect of increased banking regulation and the retrenchment of funding from Europe.
The United Arab Emirates (UAE) has been and remains to be an important player in the region. In Q1 2012, it was the second largest market for sukuk issuance in the GCC (and fourth largest globally), seeing five sukuk issued worth USD 1.9 billion and 11 conventional bonds worth USD 3 billion. Of particular interest is the UAE's first Chinese-yuan denominated ('Dim Sum') bond issued by Emirates NBD raising USD 119 million.
In order to help facilitate this growth, the DFSA has introduced a new regime for listing bonds in the Dubai International Financial Centre (DIFC) which mirrors international best practices for bond listings. The potential advantages to issuers are significant:
• A prospectus-based disclosure regime with internationally acceptable disclosure standards which is well understood by the investment community and advisers generally;
• Listing rules and processes based on international standards;
• Fast track processes for standardised bond and sukuk products (competitive with other listing venues); and
• A dual recognition regime which provides the issuer with the opportunity to list in the DIFC and other listing venues (such as London, Luxembourg, Ireland, Singapore and Hong Kong) with the same prospectus document and recognised listing process.
In addition, an issuer has the option to be incorporated in the DIFC which provides the benefits of a common law legal jurisdiction and access to the DIFC Courts, an independent judicial system modelled on the English commercial courts. Non-DIFC issuers can also 'opt-in' to the DIFC legal jurisdiction.
For further information on listing bonds in the DIFC, please see http://www.dfsa.ae/Pages/OfficialList/MarketsBrief.aspx
Brad Douglas is an Associate Director of the DFSA which is the independent regulator of financial and ancillary services conducted in or from the DIFC. It maintains the Official List of Securities for the DIFC which currently lists equities, structured products, conventional bonds and sukuk.
© Zawya 2012
