In a session on “Current Trends in Islamic Finance” at the In-House Counsel Congress today in Kuala Lumpur, Latham partners Bryant Edwards and Craig Nethercott discussed the opportunities for Shari’ah compliant debt issuance in the United States capital markets.
“US capital markets remain the deepest capital markets and investors in these markets are increasingly interested in chasing yield, including Shari’ah debt yield, from quality issuers,” commented Edwards, chair of Latham’s Middle East Practice. Nethercott, co-chair the firm’s global Islamic Finance Practice Group, noted that “investors out of the US increasingly are familiar with Shari’ah compliant structures and we are seeing the beginnings of Shari’ah compliant issuers laying the groundwork for a 144A issuance in the US markets.” (For more on this rule, please refer to The Book of Jargon, Latham’s online glossary of corporate and bank finance terminology.)
According to Edwards, achieving an optimum issuance in the US markets will require issuers “to invest time in building name recognition among a US investor base, including via Reg S issuances.” (See The Book of Jargon.)
Saudi Electricity Company had just such an issuance in recent weeks, with its successful US$1.75 billion Reg S Sukuk (including a US$500 5 year tranche and US$1,250 10 Year Tranche). As Reuters reported, “Demand for the bond was seen being very strong, given the rarity value of a dollar sukuk from a majority government-owned Saudi corporate…The company’s big investment needs over a long-term period allowed it to add a rare 10-year portion to its sukuk, which would appeal to global investors.”
Click here for more on today’s In-House Counsel Congress, organized by the In-House Community.
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