World's largest sukuk to list on new bourse

Dubai: World's biggest-ever Islamic bond, the Dh10.27 billion ($2.8 billion) sukuk for Ports, Customs and Free Zone Corporation (PCFC), is likely to be listed on the Dubai International Financial Exchange (DIFX) in two months, a senior official said.

"We plan to list a Dh10 billion sukuk on DIFX within the next two months," Fadi Ghosaini, head of business development at DIFX, told a meeting hosted by Dubai Property Group on Sunday.

He, however, did not reveal the identity of the issuer.

Currently PCFC's Dh10.27 billion sukuk is the only Islamic instrument of that size that is being offered for subscription.

The listing of the sukuk would boost the profile of Dubai's newest exchange which witnessed less than expected trading during the initial weeks of its launch.

"This will be followed by the listing of a major real estate investment trust fund on the exchange," he said. "We expect between three to five initial public offerings (IPOs) within the next few months with a combined capital offering of more than Dh3.67 billion."

As many as 15 further IPOs are planned by the end of 2006, he said.

PCFC's sukuk has been launched to finance a £3.3 billion acquisition by its international port management arm, Dubai Ports World, of British ports, ferries and property group, Peninsular & Oriental Steam Navigation Company (P&O).

Ghosaini said, DIFX has identified the property sector as one of the major growth areas for the exchange.

"Dubai's real estate boom has attracted local, regional and international investors into the burgeoning property market," said Ghosaini.

"The DIFX will provide a perfect platform for developers and real estate investors to raise capital by utilising a multitude of fund raising tools currently available. Such tools, which include debt and equity products, can help real estate companies expand their operations or finance projects in a more effective manner," he added.

The size of the region's Islamic bond market is valued less than Dh10 billion.

"If we can tap at least 25 per cent of the $300 billion Swiss funds that are looking for Islamic instruments, it will fetch us $75 billion worth of Islamic funds," he said, explaining the opportunities available in the market.

The DIFX opened on September 26 this year with five listed securities. These are structured products issued by Deutsche Bank, which cover the US S&P 500, the German

DAX 30, the Japanese Nikkei 225, the EuroStoxx 50 and the Stoxx 50.

Expectation
Issue likely to be oversubscribed

The Dh10.27billion sukuk for Ports, Customs and Free Zone Corporation (PCFC), lead-managed by Dubai Islamic Bank (DIB) and Barclays Capital (BC), has received an excellent response, and is likely to be oversubscribed by at least 50 to 75 per cent, with an expected book size of between $4 billion to $5 billion, officials said.

Dr. Mohammad Khalfan Bin Kharbash, UAE Minister of State for Finance and Industry and Chairman of Dubai Islamic Bank (DIB), said, "DIB will break its own previously-held record of lead managing the world's largest sukuk.

"The PCFC sukuk is the largest and also the first-ever convertible sukuk issue. It is convertible to 30 per cent equity shares of the PCFC entities when they go for the IPO within the next three years."

"The unique structure of the sukuk, with its convertible element, along with the attractive potential yield ranging from 7.25 per cent to 8.25 per cent per annum have made this a highly sought after instrument. If the IPO does not happen, then the yield of the Sukuk will become over 10 per cent per annum," he added.