Gatehouse plans £70m sukuk for November

Gatehouse Bank, London-based Shariah-compliant wholesale bank, is planning to launch a £70 million (Dh410m) Islamic bond (sukuk) next month, its chairman said.

In an exclusive interview with Emirates 24|7, Fahed Boodai said the sukuk is targeted at the UK corporates and is expected to be completed in November.

“We are in the midst of launching one of the first UK corporate sukuks targeted to be completed in November,” Boodai added.

Global sukuk issuance totalled $19 billion last year, of which the UAE accounted for a fifth, according to Thomson Reuters data. Kuwait Finance House(KFH) projected earlier that issuances would hit $30 billion this year in the light recovery in the global economic activity.

Qatar Islamic Bank earlier this month closed its $750 million 5-year sukuk and plans to list it on London Stock Exchange.

Boodai said decision has not yet been made about listing the sukuk.

Gulf sukuk market will likely see at least $10 billion in issuances, led by financials, in the next six months and most of them will come from high credit-quality markets such as Abu Dhabi, Qatar and Saudi Arabia, Credit Agricole’s head of its Islamic finance unit Simon Eedle said recently.

Eedle added that the time is also right for sukuk issuances outside of the Gulf region and he expects more investment money from the West to tap the Islamic finance market in 2011.

Boodai said companies are just doing copy-cat the debt products. “If we can go back to basics, there are tremendous opportunities both from Islamic side and traditional side. I think industry has come out stronger from the global financial crisis and learnt good lessons. But we need to understand how to overcome the recent sukuk (default) issues, and I think we have begun to understand them.”

He also revealed that the Islamic bank has also been mandated to restructure two local Kuwaiti companies’ debts of around $800 million. “We have completed one and are in the process of finalising the other,” Boodai added.

Achieves breakeven

Gatehouse chairman said the bank had reached breakeven, demonstrating vibrancy in the Islamic finance despite the financial crisis, its chairman said.

Speaking to Emirates 24|7 in an interview, Fahed Boodai said: “We demonstrated our capabilities with products that were welcomed by investors. We have so far closed five transactions in real estate and also demonstrated our capabilities in corporate finance by successfully restructuring obligations of a couple of companies. Financially, I'm happy to say that as of July we have achieved breakeven based on covering our costs, considering that running a bank in London is not cheap… Strategically speaking, first the target was to become a debt capital market bank in 2007, however, due to financial crisis and capital markets frozen, it was quickly realised that we needed to formulate a newer strategy; so we changed and developed sophisticated products that adhere to asset management business and financial engineering that responded to the changing economic climate. It took less than a year to turn us around.”

The group has acquired more than £150 million worth of assets year to-date majority being in the UK and one is the United States. They are being fully subscribed and syndicate by investors.
He said the bank’s real estate investments were not hit as most of them are completed properties and leased out to corporates.

“When we say real estate, we are talking about assets-backed cash flow real estate property acquired during the crisis at historically low prices. All of them have seen cash flow on day one. We have focused on tenants with good reputation such as British Telecom and Procter and Gamble, having secured long term leases of 10 years or more. In the US, we acquired property on lease in the healthcare sector and leased it to the government. We look at the credit worthiness of the entity that is occupying the real estate. We are sourcing some great deals and hopefully finalise some before the end of year.”

He said the bank is looking at partners that have access to private wealth, providing the same type of investments that were provided last year.

“We are quite successful at reengineering products. As we introduce product, we engage investors from the beginning in financing and sharing the leasing agreements; we have gained investors trust because more than 50 per cent of clients that have invested in earlier deals are investing in current deals, which shows their satisfaction.”

He said the GCC contributes a lot as a source because of two reasons; one is that Gatehouse is a Shariah-compliant bank and secondly half of its clients are from this region.

“We have had successful relationships with South Asian and Malaysian firms in particular. We tend to look into our backyard catering to the high net worth institutional community in London because there is a high number HNWIs. It is our goal to have 50 per cent of our business in GCC and the rest in other parts of the world. The Islamic finance industry’s growth demonstrated the need to provide service not just in the GCC but beyond the region’s borders.”

Positioned against world’s banking giant in London, Boodai said there is room to gain business for everyone because each is focused on different sector and different clientele.

“There is room for gaining business by proving your track record, being innovative in offering and transparent in dealings and products. We just don’t want to imitate the regular; we are looking at assets that are linked to somewhat governments in the UK like public private partnerships (PPPs).”

He said the bank may increase capital in the light of success it have had over the last eight months. “We will consider it (capital hike) when the time right. It all depends on the strategic value of bank and the areas of business that we look at.” The authorised capital is £225 million and paid-up capital is £250 million.

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