Lack of Credit Rating Impacts Dubai Sukuk

Dubai’s recently issued $1 billion sukuk priced at an attractive 2.763%, comparing well to market peers including Sharjah which issued a similar amount in June in a seven-year issuance at 2.942%, as well as Saudi Arabia’s most recent issuance in Oct 2019 for $2.5 billion at a profit rate of 2.969%.

Reuters reported Dubai’s lack of a credit rating may have contributed to Asian investors shying away as buyers mostly came from Middle East, Europe and the United Kingdom to reach an order book of $6.6 billion.

Bahrain and IILM

Bahrain announced on 9^th September it had issued a $1 billion in sukuk at 3.95%, whilst the Malaysian based International Islamic Liquidity Management Corporation issued short term sukuk for $900 million consisting of a $400 million 1 month tenor at 0.22% and a $500 million tenor at 0.43% respectively. The IILM short-term Sukuk programme is rated “A-1” by S&P. The total of IILM Sukuk outstanding is USD 3.0billion.

The IILM tender resulted in significant demand from Asian and Middle Eastern investors, with an order-book that closed in excess of USD1.59billion, representing an average over subscription rate of 1.77 times.