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Tuesday, 14 August 2007

Bahrain's IIFM endorses Solidarity Trust Services Limited $300 million Islamic bonds (Sukuk)

The Bahrain- based International Islamic Financial Market (IIFM) endorsed Solidarity Trust Services Limited $300 million Islamic Sukuk issue guaranteed by The Islamic Development Bank's (IDB) on August 3, 2003. The endorsement comes in line with the IIFM's plan to develop the Islamic capital market and to ensure the harmonisation and standardisation of Islamic financial products so as to achieve global appeal and acceptance.The issue is unique in almost all its aspects ranging from the issuer, the guarantor, the arranger and more importantly the innovative structure of the deal, which is a combination of securitization of ijarah, murarabah and Istisna contracts with a minimum of 51 percent on the Ijara assets.Mr. Abdul Rais Abdul Majid, chief executive officer of the IIFM said that the transaction is the first of its kind and it will definitely have a great influence in the development of sukuk or Islamic bond market in future.He added :"Our main mandate is to encourage and facilitate the development of Islamic financial instruments and the deepening and widening of Islamic capital markets". It is the first international Islamic Sukuk issue by a non-sovereign entity.The Islamic Development Bank (IDB) is a multilateral development finance institution, which has been a strong supporter of the development of Islamic capital and a keen advocate of its success. The issue is a benchmark for future issues by other financial institutions and OIC member countries.The Solidarity Trust Services Limited (STSL), a special purpose company incorporated in Jersey Channel Islands will issue the trust certificates whereas the Islamic Corporation for the Development of Private Sector (ICD) will play an intermediary role by purchasing the asset from IDB and selling it to the Solidarity Trust Services Limited (STSL) at the consolidated net asset value. The certificate holders will be entitled to receive periodic profit distribution.The Citigroup Global Markets Limited acts as the lead arranger and the market-maker for the issue, which is rated 'AAA' by S&P and 'AA' by Fitch based on the credibility and the financial strength of the guarantor of the issue.

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