Sharjah could deliver 2016’s first sovereign sukuk

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Lead arrangers have been holding investor meetings this week to pave the way for the Government of Sharjah’s second sukuk. The new sovereign bond, which is expected to be in excess of US$500 million, could be the first sovereign sukuk to be issued globally in 2016. Global rating agency Standard and Poor’s has forecast fewer sukuk issuances this year, possibly decreasing up to 20 percent in value compared to 2015, as a result of economic pressures on economies in the GCC and Malaysia.

The government has appointed Bank Of Sharjah, Barclays, Commerzbank, Dubai Islamic Bank, HSBC and Sharjah Islamic Bank as lead arrangers for the transaction. Meanwhile, Moody’s Investors Service has assigned a provisional rating of (P)A3 to the proposed US dollar sukuk, similar to the rating assigned by the agency to the Government of Sharjah’s first sovereign sukuk in 2014.

According to Moody’s the second planned sukuk reflects the Sharjah government’s increased focus on market funding and a re-profiling of the government’s debt burden, which has resulted in lower financing costs. Sharjah secured its first sovereign credit ratings from Moody’s Investors Service and Standard and Poors in 2014: both rating agencies giving the government an A-class economic rating with a stable outlook.

The launch of the Government of Sharjah’s first sovereign Islamic bond in 2014 was met by massive demand from investors. Launched at a size of US$750 million (AED 275b), the 10-year US dollar sukuk reportedly received orders worth about US$7.85 billion (AED 29b).

Sharjah has received recognition for its fiscal policy, the diversity of its economy and it’s efforts to stimulate interest in Islamic arts and sciences. The government allocated 45 percent of last year’s record AED 17.7 billion (US$ 4.8 b) budget to the emirate’s economic development.

Sharjah is the only economy in the Middle East region with no single sector contributing to more than 20% of its GDP.

Sources: S&P, Moody’s, media