Middle East Banks Buy Vast Majority Of Landmark Goldman Sachs Sukuk

Middle Eastern banks bought the vast majority of a debut $500 million sukuk issue by Goldman Sachs, a positive sign for other conventional banks hoping to tap the region’s liquidity by issuing Islamic debt, according to data from lead managers.

Goldman priced its five-year sukuk on Tuesday at a profit rate of 2.844 per cent, drawing about $1.5 billion of investor orders, after roadshows in Qatar and the United Arab Emirates.

It was only the second sukuk issue from a conventional bank outside a predominantly Muslim country; HSBC issued $500 million of sukuk in 2011.

Middle East investors bought 87 per cent of the Goldman sukuk, while 11 per cent went to Europe and two per cent to Asian investors, a document from lead arrangers showed.

Banks bought 77 per cent of the bonds, asset managers bought 22 per cent and private banks bought one per cent.

An initial attempt by Goldman to sell sukuk three years ago, when it announced a $2 billion issuance programme, ran into controversy after some analysts said it might violate Islamic bans on interest payments and monetary speculation.

Although the bank insisted that those concerns were unfounded, it never went ahead with the 2011 issue.

This time, Goldman adjusted the sukuk structure and enlisted heavyweight Gulf banks to arrange the sale, and it appeared to avoid any controversy. Goldman picked itself, Abu Dhabi Islamic Bank, Emirates NBD, National Bank of Abu Dhabi, Qatar’s QInvest and the investment banking arm of Saudi Arabia’s National Commercial Bank to arrange the issue.

France’s Societe Generale and Japan’s Bank of Tokyo-Mitsubishi UFJ set up sukuk programmes in Malaysia this year, but have not issued yet.