Oman May Float Debt Instruments For Raising Funds From International Markets

Muscat: The government of Oman could float an international bond, or sukuk, after the successful completion of the debut issuance of its sovereign sukuk.

The second phase could be an international issue, which might be offered in a dollar format to attract international investors, Hussain Ghalib Al Yafai, head, corporate and institutional clients and financial markets of Standard Charted Bank told Times of Oman.

Standard Charted Bank and Bank Muscat are joint lead managers of the first sovereign sukuk issue in Oman, which opened for a two-week subscription on October 8.

Al Yafai expects the issuing of the first sovereign sukuk to evoke a good response. “Islamic banks are waiting for investment opportunities. It is sound that the sovereign sukuk is coming out before similar issues from state-owned companies, since it will set a bench mark in terms of pricing,” noted Al Yafai.

Further, the Oman government is trying to create a yield curve, which will help deepen conventional and Islamic capital markets.

Al Yafai also said that with the first issuance of thesukuk,which is a senior unsecured instrument, the government is creating a platform for Islamic funding. “It is easy to replicate by the government and state-owned companies,” Al Yafai said, adding, “Few state-owned companies have started assessing the feasibility of issuing in an Islamic format. A few other corporates (in the private sector) are also looking at this kind of instrument, because sukuks open upliquidity pools from both Islamic and conventional investors.”

According to Al Yafai, Oman wants to develop the market for sukuks, such as inother GCC countries and Malaysia. “In Malaysia, it is lot easier to issue sukuks, because they can have very light structures.”

The debut sovereign sukuk, structured as asukuk-al-Ijara which has a sale and lease back component, will have a tenor of five years.

He said the first sovereign sukuk issue is targeted at sophisticated investors. “After the successful completion of the issue, the government could look at other forms of funding debt.”

Originally published on www.timesofoman.com