Britain’s Debt Management Office said on Monday it was inviting banks to join a syndicate for the country’s second sale of sovereign sukuk or Islamic bond.
The DMO also said it would hold a tender for the sale of 250 million pounds worth of the 0.125% 2048 index-linked gilt on Jan. 23 and would bring forward the auction of the 0.125% 2028 index-linked gilt by a week to March 5.
Britain became the first Western country to issue an Islamic bond in 2014, raising 200 million pounds ($260 million) from a five-year deal that was 10 times oversubscribed.
The UK’s first sovereign Sukuk received very strong demand, with orders totalling around £2.3 billion, and allocations have been made to a wide range of investors including sovereign wealth funds, central banks and domestic and international financial institutions.
Investors from the major centres for Islamic finance in the Middle East, Asia and Britain were all represented in the final allocation. The profit rate on the Sukuk has been set at 2.036% in line with the yield on gilts of similar maturity.
Britain’s sovereign Sukuk uses the Al-Ijara structure, the most common structure for sovereign Sukuk, with rental payments on property providing the income for investors.
The Chancellor of the Exchequer George Osborne said: “Today’s issuance of Britain’s first sovereign Sukuk delivers on the government’s commitment to become the western hub of Islamic finance and is part of our long term economic plan to make Britain the undisputed centre of the global financial system. We have seen very strong demand for the Sukuk, resulting in a price that delivers good value for money for the taxpayer. I hope that the success of this government issuance will encourage further private sector issuances of Sukuk in the UK.”
By issuing sovereign Sukuk, the government has demonstrated that it is possible to create a successful British base for Islamic finance.
Source Reuters