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Wednesday, 6 February 2008

M Stanley sees 1st blue-chip sukuk in Q1

DUBAI (Reuters) - The first global Islamic bond issue by a multinational company could be launched in the next two months, U.S. investment bank Morgan Stanley said on Tuesday.
Yavar Moini, executive director in the bank's global capital markets division, said it was preparing a $5 billion medium-term note program for a borrower he declined to name. The first tranche is set to be issued in the first quarter of 2008.
"It's the first time really a blue-chip multinational from outside the region is going to issue something of this size and tap the sukuk market," Moini told the Reuters Islamic Finance Summit.
Demand for Islamic bonds, or sukuk, is surging as more Muslims seek investments that comply with Islamic law. This has coincided recently with the closure of other funding avenues for borrowers due to the global credit crunch.
Moini said the Islamic bond market had been affected by the fallout from the sub-prime mortgage crisis in the United States, with the cost of larger issues rising sharply, but borrowers would continue to tap the market.
Non-Muslim borrowers were being drawn by the prospect of diversifying their financing base and reaching a class of investor that previously had not been accessible.
"We hope that this will be a landmark issue and will encourage similar offerings," Moini said.
Forecasts for the volume of Gulf Arab Islamic bond sales have been revised lower in recent months due to global credit market turmoil but bankers still expect 2008 issuance to match or slightly exceed last year's record $12 billion.
Regional sukuk issuance should be supported by booming real-estate markets, infrastructure projects, the expansion of Islamic banking and the need for companies to refinance acquisitions, Moini said.
Equity-linked debt, particularly mandatory convertible bonds -- where investors receive shares rather than cash at maturity -- would come to the fore thanks to the lower cost of borrowing associated with such instruments, he added.


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