Pakistan, Turkey, Axiata, Jordan Planning Sukuk Sales: Islamic Bond Alert

The following borrowers are expected to sell Islamic bonds, which use asset returns to pay investors to comply with the religion’s ban on interest.

Global sales of so-called sukuk fell 23 percent to $6.48 billion so far this year, according to data compiled by Bloomberg. Issuance totaled $20.2 billion last year, up from $14.1 billion in 2008.

PAKISTAN: Pakistan plans to sell sukuk in the domestic market for the first time in two years to fund its budget deficit, a spokesman for the central bank said. The State Bank of Pakistan will offer the Shariah-compliant debt in the first quarter of the fiscal year that starts July 1, and details will be announced this month, Syed Wasimuddin said. The Islamic republic plans to sell 35 billion rupees ($409 million) of sukuk in the domestic market, the News newspaper reported on June 23, citing an unidentified government official.

TURKEY: Turkey will consider selling yen-denominated bonds or Islamic securities as it seeks to reduce its reliance on dollars for public financing, said Emre Balibek, the Treasury’s deputy general director for public finance. He didn’t provide details. Turkey is rated Ba2 by Moody’s Investors Service and BB by Standard & Poor’s.

AXIATA GROUP BHD.: Southeast Asia’s second-biggest mobile- phone operator plans to sell as much as 4.2 billion ringgit ($491 million) of Islamic bonds by the end of July to refinance debt, according to Chief Financial Officer Yusof Annuar Yaacob.

JORDAN: Jordan may sell conventional or Islamic bonds internationally to help the government with its finances and take advantage of low borrowing costs, Finance Minister Mohammad Abu Hammour said, without specifying the size and timing of the sale. The country is rated Ba2 by Moody’s and BB by S&P.

INDONESIA: The Southeast Asian country plans to sell as much as $650 million of Islamic bonds in October, having scaled back and delayed an original proposal to raise $750 million in July. The government may pick three of 11 shortlisted foreign- investment banks as joint lead managers for the sale, said Dahlan Siamat, the ministry’s director of Islamic financing. Indonesia will also sell rupiah-denominated sukuk to individual investors in the first quarter of 2010, part of its plans to sell retail Islamic bonds annually, Siamat said. The nation is rated Ba2 by Moody’s and BB by S&P.

PT PERUSAHAAN LISTRIK NEGARA: Indonesia’s state utility company plans to sell 500 billion rupiah ($55 million) of Islamic bonds and 2.5 trillion rupiah of conventional notes in July to fund expansion of its electricity transmission network.

ISLAMIC DEVELOPMENT BANK: The Jeddah-based bank plans to raise $1 billion from the sale of Islamic bonds to finance projects in member countries, the Saudi Press Agency reported, citing President Ahmed Mohammed Ali. The bank is currently working on raising funds for a $12 billion program for the development of Africa, initiated in 2008, Ali said June 9.

CAGAMAS BHD.: The Malaysian national mortgage company hired Al-Rajhi Bank and RHB Capital Bhd. to help it sell around 1 billion ringgit of Islamic bonds this month, according to people familiar with the plan. The Kuala Lumpur-based company is developing a new type of sukuk acceptable to investors in the Middle East, Chief Executive Officer Steven Choy said last month. The bonds are being developed in conjunction with Al-Rajhi Bank and a total of 10 billion ringgit may be sold, Choy said.

AHMED SALEM BUGSHAN GROUP: The Saudi Arabia-based company, known as ASB, plans to raise as much as $100 million selling five-year Islamic bonds to fund projects including a mega-steel plant and a real-estate development, Arab News reported on its website, citing Mohamed H. Zakaria, senior vice president of the group. The bond will offer a semi-annual return of 125 basis points more than six-month Libor, the rate banks charge each other on loans, according to the report. ASB may ask Fitch Ratings or S&P to rate the debt, the report said.

KHAZANAH NASIONAL BHD.: Malaysia’s state investment agency may raise as much as S$500 million ($353 million) selling Singapore dollar-denominated Islamic bonds to help fund its offer to double its stake in hospital operator Parkway Holdings Ltd., according to two people familiar with the plan. The sale may take place this month, according to one of them, who declined to be identified because the discussions are private.

MALAYSIA AIRPORTS HOLDINGS BHD.: The state-controlled airport operator may sell ringgit- or dollar-denominated bonds to meet its funding needs, it said in a stock exchange filing. The company may sell 1 billion ringgit of sukuk and $500 million of conventional bonds to fund its second low-cost airport project near Kuala Lumpur, Reuters said. It hired CIMB Group Holdings Bhd. and Citigroup Inc. for the sale, the report said.

QATAR ISLAMIC BANK SAQ: The Gulf state’s biggest Shariah- compliant bank plans to sell as much as $750 million of sukuk in the second half, Chief Executive Officer Salah Mohammed Jaidah said. Talks with rating service providers have been completed for the company’s first Islamic debt offering, he said.

SAUDI ELECTRICITY CO.: The Arab world’s largest utility company may issue global sukuk bonds in 2011 after April’s sale of 7 billion riyal ($1.9 billion) of Islamic notes, according to Executive Director of Treasury Fahad Alsudairy.

CAHAYA JAUHAR SDN.: The unit of Malaysian developer UEM Land Bhd. plans to sell 114 million ringgit of Islamic bonds, according to a statement from RAM Holdings Bhd., a Malaysian rating service company. RAM assigned a preliminary rating of AAA, its highest, to the bond. Proceeds will be used to repay loans and pay contractors and suppliers working on the first phase of the project, RAM said.

GENERAL ELECTRIC CAPITAL CORP.: The unit of General Electric Co. plans to issue its second Islamic bond in late 2010 or 2011, Reuters reported, citing Aris Kekedjian, chief executive of GE Capital Middle East and Africa. It sold $500 million of Shariah-compliant bonds in November.

NAKHEEL PJSC: The property unit of Dubai World, which is restructuring $10.5 billion of debt, plans to sell Islamic bonds that will give an annual return of 10 percent to trade creditors, two people familiar with the proposal said in April. The deal is conditional on trade creditors representing at least 95 percent of the value of all claims agreeing to the deal. On May 13, the company reached agreement with trade creditors for more than 50 percent of the claims and repaid 3.6 billion dirham ($980 million) of bonds due on the same day.

QATARI DIAR REAL ESTATE INVESTMENT CO.: The Qatari developer may raise $1.5 billion selling 10-year conventional bonds and five-year Islamic securities, said a person familiar with the plan. HSBC Holdings Plc and Barclays Capital are among banks expected to manage the sale, which could be completed in the next three months, the person said.

LUXEMBOURG: The country is considering selling Islamic bonds, central bank Governor Yves Mersch said at a conference in Bahrain without disclosing the size and the timing of the sale.

SUDAN: Sudan expects to raise $300 million selling Islamic bonds by the end of this year to fund development projects, central bank Governor Sabir Mohamed Hassan said. Sudan had initially planned the bond sale last year.

KENCANA PETROLEUM BHD.: The Malaysian oil and gas contractor will sell 250 million ringgit of Islamic bonds this year to help finance vessel purchases. State bond insurer Danajamin Nasional Bhd. agreed to guarantee the notes, allowing them to have the highest AAA rating for local bonds.

WAHA CAPITAL PJSC: The Abu Dhabi-based investment and leasing company said its shareholders approved a plan to issue mandatory convertible bonds or sukuk worth 1 billion dirhams ($272 million) to strengthen its finances and support expansion plans.

VTB BANK OJSC: VTB Bank plans to sell Islamic bonds worth about $200 million in the second half of the year, Reuters reported in April, citing an unidentified person familiar with the plan.

EMIRATES INTEGRATED TELECOMMUNICATIONS CO.: The Dubai-based phone operator known as Du,, may consider selling Islamic bonds in coming years to fund expansion, Chief Executive Officer Osman Sultan said in April without disclosing the amount.

LAFARGE MALAYAN CEMENT BHD.: Malaysia’s largest cement maker will sell as much as 350 million ringgit of Islamic bonds under a seven-year program to fund expansion, the company said March 26. The debt is rated AA2 by RAM Rating Services Bhd., its third-highest ranking for long-term corporate debt instruments.

SAUDI ARABIAN OIL CO.: Saudi Aramco, the world’s largest state-owned oil company, and Total SA expect to raise $8 billion in debt financing for a joint refinery and petrochemical project in the “coming months,” according to Saleem Shaheen, chief executive officer of Saudi Aramco Total Refining and Petrochemical Co. The debt package will include the sale of Islamic bonds, he said.

KAZAKHSTAN: Kazakhstan has drafted a bill to allow it to sell Islamic bonds this year for the first time, Finance Minister Bolat Zhamishev said. The funds will be used to help finance the budget deficit, he said. The central Asian country is rated Baa2 by Moody’s and BBB- by S&P.

LEBANON: Lebanon may sell Islamic bonds in 2011, according to the central bank in February. The country has more than $2 billion of dollar-denominated debt maturing this year, according to data compiled by Bloomberg. It is rated B2 by Moody’s, five levels below investment grade.

KUVEYT TURK KATILIM BANKASI AS: The Islamic lender owned by Kuwait Finance House KSC plans to sell sukuk worth between $100 million and $150 million, Sabah newspaper reported, citing Chief Executive Officer Ufuk Uyan. The bonds will be based on the bank’s leasing receivables and have a maturity of between three and five years, according to the Istanbul-based newspaper.

THAILAND: The government plans to sell as much as 50 billion baht ($1.5 billion) of Shariah-compliant debt to help finance its infrastructure projects, according to state-owned Islamic Bank of Thailand, which will help arrange the sale. The bonds may be sold in the third quarter, said Dheerasak Suwannayos, the bank’s president.

To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net

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