UK debut Sukuk seeks diverse investor base, learning from Turkey’s Sukuk debut mistakes

The exclusion of the UK’s domestic Islamic banks as arrangers for the UK debut Sukuk raised eyebrows in London last week. The UK Treasury had already appointed HSBC in January to arrange the deal and last week it added four more banks to the syndicate; Qatar’s Barwa Bank, Malaysia’s CIMB, National Bank of Abu Dhabi and Standard Chartered.

According to a person with knowledge of the deal, the UK is seeking a diverse investor base with the aim of heeding the lessons from Turkey’s debut Sovereign Sukuk issuance, which witnessed an over allocation to Middle East investors.

The subsequent selling, due to over allocation resulted in the Turkish sukuk somewhat tanking in the secondary market and trading below par at 98 cents on the dollar and thus removing some of the gloss from a nonetheless successful over-subscribed and up-sized debut Sukuk issuance. The Turkish sukuk was sold 58 percent to the Middle East, 13 percent to Europe, 12 percent to Asia, nine percent to Turkey and eight percent to U.S. investors.

UK Road Show begins as Sterling hits five-year highs

The UK Sukuk for £200 million with a maturity of five years will be denominated in Sterling, and given Sterling’s recent strength; it was assumed the UK Sukuk would have been aimed almost entirely at domestic UK consumption.

The road show will start on June 17 in Jeddah and Kuala Lumpur, then moving to Riyadh, Dubai, Doha, and Abu Dhabi, ending in London on June 20.