UK sells $339 million of debut Islamic bonds

UK sells $339 million of debut Islamic bonds

Some  British money with an Islamic Bank of Britain documentsAs noted in a previous report, “A sovereign sukuk is the centrepiece of Prime Minister David Cameron’s bid to position London as a leading hub for Islamic finance, as competition heats up with financial centres in the Middle East and Asia.” This is what is behind the Cameron government’s utterly supine response to Islamic supremacist aggression and intimidation in the school system and elsewhere: he has to create a hospitable environment for Sharia as part of his plan to make London a global capital of Islamic finance. And if the freedom of speech and equality of rights for women and non-Muslims have to go, so be it.

“U.K. Sells Islamic Bonds in First Non-Muslim Sovereign Issue,” by Lyubov Pronina, Bloomberg, June 25, 2014 (thanks to Peter):

The U.K. raised 200 million pounds ($339 million) from Islamic bonds, with investors bidding for more than 10 times the amount offered as the nation became the first non-Muslim sovereign issuer of the debt.

The notes maturing on July 22, 2019, were sold at a profit rate of 2.036 percent, offering zero spread to the 1.75 percent gilt due in 2019, according to data on the U.K. Debt Management Office page on Bloomberg. Investors bid for about 2.3 billion pounds of the debt, the Treasury said in a statement.

Prime Minister David Cameron announced the plan to sell securities that comply with Islam’s ban on interest on Oct. 29. The sukuk will help London establish itself as a global capital for Islamic finance alongside Dubai and Kuala Lumpur, Cameron said in a speech at the time. The industry is growing 17 percent a year and may be valued at $2.67 trillion by 2017, according to PricewaterhouseCoopers LLP.

“We have seen very strong demand,” George Osborne, Chancellor of the Exchequer, said in a Treasury statement. “I hope that the success of this government issuance will encourage further private sector issuances of sukuk in the U.K.”

Central banks, sovereign wealth funds as well as domestic and international financial institutions received allocations of the issue that will settle on July 2 and be listed on the London Stock Exchange, according to the Treasury. Rental payments on property will provide income for investors, it said.

A “significant challenge” to the sukuk issue was the limited number of suitable government assets to back it, according to Robert Stheeman, chief executive officer at the U.K. Debt Management Office. Such assets need to be unencumbered and directly owned by the central government, he said.

“This wasn’t about trying to generate as much money as possible, it was about trying to send a very strong signal about the U.K.’s commitment to Islamic finance,” Stheeman said at a Euromoney conference in London today.

The sale will serve as a market benchmark for other public or private sector issuers in the U.K., according to Khalid Howladar, global head of Islamic Finance at Moody’s Investors Service.

“While a solid Islamic banking base is necessary to become a true universal Islamic finance hub, there’s no doubt that supporting the industry and its service providers will enable London to maintain a share of the global sukuk market,” New York-based Howladar said in an e-mailed statement today.

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