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Islamic Finance Information Service <829114.1359387856@ems.euromoneyplc.com> Date: Mon, May 13, 2013 at 6:04 AM
Subject: Turkish participation sukuk comes of age
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| May 13, 2013
| Turkish participation sukuk comes of age Research by Mahinaz El Aasser
Although Turkey's first participation (Islamic) bank, Albaraka Turk, was established in 1985, Turkey's first sukuk law wasn't drawn up until 25 years later, in April 2010. The "sukuk communiqué" was set by the Capital Markets Board as a means of diversifying financial instruments, to minimise risks and to attract more foreign investments. It included provisions about special purpose vehicles and ijara certificates. The communiqué included several disadvantages, especially when compared with conventional bonds provisions. In addition to this, tax laws had several shortcomings which were not addressed until June 2011 when a bill was passed with several amendments for sukuk taxations.
Turkey's sukuk market has managed to reach $3.79bn in only three years. Kuveyt Turk Katilim Bankasi (KFH-Turkey) was the first participation bank to tap the market, in August 2010, with its $100m ijara and murabaha sukuk. In 2011, three sukuk were announced but only one took place. Since the market was still in its first steps and with the tax disadvantages in the sukuk bill, the first Turkish sukuk was domiciled in Turkey rather than internationally sydicated.
Kuveyt Turk built on its successful debut by issuing a $350m ijara and murabaha sukuk at a rate of 5.875% the following year. Noor Islamic Bank announced its intention to issue two sukuk inthe Gulf region and the other in Turkey with a value $150m each. No further steps have taken place, however.
Albaraka Turk Katilim Bankasi announced its intentions to issue $250m sukuk in November 2011. The deal was postponed, however, as investors had put very high expectations on the yields, whereas the market had hit a turbulent patch.
2012, which showed the largest value of sukuk issued in Turkey, witnessed the issuance of the first Turkish government sukuk. The deal was initially planned from 2008, but was postponed due to political reasons. Proceeds from the $1.5bn ijara sukuk, which was issued through the Undersecretariat of Treasury Asset Leasing Company, will be used for general financing purposes of the government.
This was then followed by another domestic ijara sukuk that in Turkish Lira worth TL1.6bn. Although till now only two sovereign sukuk were issued compared to five corporate sukuk, it is noteworthy that the former's values were larger from the corporate ones. Sovereign sukuk were worth $2.4bn while corporate sukuk amounted to $1.4bn.
Akbank and Turkish Airlines said in 2012 that they planned to issue sukuk worth TL500m and $500m, respectively, but again no further announcements have yet been made. This year, Agaouglu Group said that it will issue $2bn of sukuk to finance the construction of Istanbul's financial district, but the transaction didn't take place yet. In March, Asya Bank, which postponed its sukuk since 2011, issued $250m murabaha sukuk, with a ten year non-call five year maturity, which was the largest tenor in Turkey. Following this success, Turkiye Finans issued $500m of sukuk but at a lower return of 3.95% compared to the7.5% seen for Bank Asya's issuance. The following day, Albaraka Turk closed its $200m sukuk that was priced at 7.75%. The bank will use it to finance its capital base. It should be noted that if Turkey aims to use sukuk to help its internal economy flourish, local denominated sukuk would be of great help. That is, of course, besides its dollar sukuk issuances, which confirm its position internationally. | | | | |
This communication is from Euromoney Institutional Investor PLC, a company registered in England and Wales under company number 954730 with registered office at Nestor House, Playhouse Yard, London EC4V 5EX, UK. |
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