Neo Merchants Capital launched a domiciled asset-backed Sukuk programme, the first asset-backed SAR-denominated Sukuk programme in Saudi Arabia issued by a special purpose entity licensed by the Saudi Capital Market Authority (CMA).
The SAR 1 billion programme will be privately offered in multiple series over two to three years.
Commenting on the announcement, Tarek Tawfik, Managing Director and CEO of Merchants said:
“Asset-Backed Sukuk is considered one of the best practices in the Islamic Finance world as it provides Sukukholders with true exposure to the underlying asset. We are certainly proud of sponsoring this programme that combines the merit of a local issuance with underlying investments in Europe’s real estate assets. Issuance of Sukuk to make investments is a new value add to the Saudi capital market industry, thanks to the Saudi Capital Market Authority laws and regulations that support the issuance of asset-backed instruments including the rules for special purpose entities.”
The Sukuk proceeds shall be used to acquire real estate assets in Eurozone countries with a primary focus on Germany, the Riyad-based emerging investment bank said in a statement on Monday.
“Germany real estate market is our top priority. The transparency and efficiency in the world’s fourth-largest economy is remarkable. Unlike other countries where the real estate market activity is concentrated in one or two metropolitans, Germany’s federal states system has created a nationwide diversified metropolitan base, each offering attractive risk/return profiles,” said Osama Abbass, Executive Director at Merchants.
“Another distinguished fundamental theme is that fact that the German market activity is dominated by local long-term institutions like insurance, banks and pension groups, who are continuingly seeking real returns given the low-interest-rate environment,” Abbass added.