15 May 2013
Muscat: Al Madina Financial and Investment Services has submitted an issue prospectus with the Sultanate's market watch dog Capital Market Authority (CMA) for privately placing OMR50 million Islamic debt instrument or sukuk, which is going to be the first such large issue in Oman. "It is going to be a private placement. Although it is an issue, the requirement is less than those stipulated for a public issue," Capital Market Authority Executive President Abdullah bin Salem Al Salmi, told Times of Oman.
The proceeds of the issue are for funding the ongoing expansion of Muscat Grand Mall (MGM) facilities developed by Tilal Development Company (TDC). Al Salmi said rating is not mandatory for this issue since it is a private placement. The minimum subscription of this issue is expected at around OMR2 million. "Since it is a private placement, the minimum subscription is quite high." "As soon as we get an approval from Capital Market Authority, we will launch the issue," noted Eng Abdul Rahman Barham, chief executive officer of Al Madina Real Estate, another group company of Al Madina group.
He also noted that the company has already got an 'investment favourable rating' for the sukuk issue, although it is not mandatory. Al Salmi earlier had said that Islamic debt instruments like sukuks are needed for Islamic banks to invest their deposits.
CMA is looking at this issue in this perspective and are encouraging companies to float sukuk issues. Since an exclusive Islamic bank and a host of conventional banks started window operations, the deposit growth (or growth on the liability side) is going to be much higher than the anticipated growth in asset side and the Sharia compliant banks will find it extremely difficult to invest their deposits, if there is a lack of Islamic debt instruments like sukuks in the financial system.
The government is in an advanced stage to announce sukuk regulation as the draft is already ready. According to the draft regulation, a joint stock company or a special purpose vehicle can float Islamic debt instrument.
The draft regulation stipulates that a company can issue sukuk only to the extent of its net worth, which is not a condition in other countries. Other major highlights of the draft regulation are formation of a Sharia Supervisory Board with at least three members, permission to go for either public issue or private placement of the instrument, mandatory listing of sukuk instrument on the bourse and rating of sukuk instrument is the discretion of the issuer.
The members appointed to the Sharia Supervisory Board should be competent to perform their functions. However, unlike Islamic banks, the Sharia Supervisory Board can be of the lead arranger or an outside party like an advisory firm, who can be hired on a transaction basis, according to the stipulation of the draft regulation.
Muscat: Al Madina Financial and Investment Services has submitted an issue prospectus with the Sultanate's market watch dog Capital Market Authority (CMA) for privately placing OMR50 million Islamic debt instrument or sukuk, which is going to be the first such large issue in Oman. "It is going to be a private placement. Although it is an issue, the requirement is less than those stipulated for a public issue," Capital Market Authority Executive President Abdullah bin Salem Al Salmi, told Times of Oman.
The proceeds of the issue are for funding the ongoing expansion of Muscat Grand Mall (MGM) facilities developed by Tilal Development Company (TDC). Al Salmi said rating is not mandatory for this issue since it is a private placement. The minimum subscription of this issue is expected at around OMR2 million. "Since it is a private placement, the minimum subscription is quite high." "As soon as we get an approval from Capital Market Authority, we will launch the issue," noted Eng Abdul Rahman Barham, chief executive officer of Al Madina Real Estate, another group company of Al Madina group.
He also noted that the company has already got an 'investment favourable rating' for the sukuk issue, although it is not mandatory. Al Salmi earlier had said that Islamic debt instruments like sukuks are needed for Islamic banks to invest their deposits.
CMA is looking at this issue in this perspective and are encouraging companies to float sukuk issues. Since an exclusive Islamic bank and a host of conventional banks started window operations, the deposit growth (or growth on the liability side) is going to be much higher than the anticipated growth in asset side and the Sharia compliant banks will find it extremely difficult to invest their deposits, if there is a lack of Islamic debt instruments like sukuks in the financial system.
The government is in an advanced stage to announce sukuk regulation as the draft is already ready. According to the draft regulation, a joint stock company or a special purpose vehicle can float Islamic debt instrument.
The draft regulation stipulates that a company can issue sukuk only to the extent of its net worth, which is not a condition in other countries. Other major highlights of the draft regulation are formation of a Sharia Supervisory Board with at least three members, permission to go for either public issue or private placement of the instrument, mandatory listing of sukuk instrument on the bourse and rating of sukuk instrument is the discretion of the issuer.
The members appointed to the Sharia Supervisory Board should be competent to perform their functions. However, unlike Islamic banks, the Sharia Supervisory Board can be of the lead arranger or an outside party like an advisory firm, who can be hired on a transaction basis, according to the stipulation of the draft regulation.
© Times of Oman 2013
