Birmingham bank issues £250m Islamic bond
Birmingham-based Al Rayan Bank has become the first bank in the world to issue a public Sukuk (Islamic bond) in a non-Muslim country.
The Edgbaston headquartered bank, the largest of its kind in the UK, said the move reinforced the UK’s position as the western hub for Islamic finance.
The appropriately titled Tolkien Funding Sukuk No.1 is the bank’s inaugural securitisation of residential finance-backed security (a Sharia compliant alternative to a conventional RMBS).
The £250m sterling-denominated Sukuk has an expected called weighted average life of three years. The transaction is secured by a portfolio of prime UK, first-charge, owner-occupied, Home Purchase Plans originated by Al Rayan Bank.
The securitisation of residential assets is provisionally rated AAA by Standard & Poor’s (S&P) and Aaa by Moody’s Investors Service.
The Sukuk is the largest-ever sterling denominated Islamic bond issued by a UK entity, following the UK Government’s £200m Sukuk, which was issued in 2014.
The Tolkien Sukuk was oversubscribed with final demand at 155% of book, which the bank said reflected the strong demand for Islamic financing instruments in the market, and the fact that the UK was well positioned to become the destination of Sukuk issuance for Western Europe.
European RMBS investors and conventional and Islamic banks and pension funds were all represented in the final allocation.
Legal advice on the issuance was provided by Norton Rose Fulbright’s London team, and joint lead manager for distribution was Standard Chartered Bank’s Financial Institution team in London. Sharia certification of the structure was provided by the Sharia Supervisory Committees of both Al Rayan Bank and Standard Chartered Bank.
Sultan Choudhury, CEO, Al Rayan Bank, said: “The issuance of this ground breaking Sukuk is a major landmark in the history of Al Rayan Bank, but it is also a significant development for the global Islamic finance sector which reinforces the UK’s position as a global hub for Islamic banking.
“Tolkien Sukuk has been designed to ensure that it is recognisable as High Quality Liquid Assets (HQLA) and as a securitisation under CRD definitions; this has resulted in high levels of demand from conventional institutions as well as from Islamic investors.”
Proceeds raised from the Sukuk issuance will be used by Al Rayan Bank to fund further growth in its asset book, which has increased by more than 23% over the last 12 months.
