DUBAI/KUALA LUMPUR: Goldman Sachs is reviving plans to raise at least $500m with its first issue of Islamic bonds, a sign that Islamic finance is going mainstream as big conventional banks seek to tap Middle Eastern money.
The US bank will meet investors in Qatar next Wednesday and the United Arab Emirates on the following day to discuss selling sukuk, a document from lead managers of the sale said on Thursday. The sukuk are expected to have a tenor of five years.
If the issue goes ahead after the investor meetings, Goldman will become only the second non-Islamic bank to sell sukuk, after the Middle Eastern unit of HSBC did a $500m deal in 2011.
The underlying assets in Goldman’s sukuk issue would be linked to commodities and crude oil, a source with knowledge of the plan said, adding that the proceeds would be used in the commodities business of J Aron & Co, a Goldman unit. Other global banks are poised to follow Goldman. In recent months, France’s Societe Generale and Bank of Tokyo-Mitsubishi UFJ, Japan’s largest lender, have been preparing to issue sukuk in Malaysia.
An initial attempt by Goldman to sell sukuk in 2011 ran into controversy and was called off as some in the industry accused it of failing to follow Islamic principles, which include bans on the payment of interest and pure monetary speculation.
But the US bank is now returning to the market as the Islamic finance industry grows rapidly, fuelled by booming economies in the Gulf and southeast Asia.
New issues of sukuk so far this year total $85.9bn through 456 deals globally, up from $74.9bn through 558 deals a year earlier, according to data from Zawya, a Thomson Reuters company.
Those volumes remain small compared to conventional finance, but are now big enough to make it worthwhile for Western borrowers to get in on the act.
For some investors, Goldman is a symbol of Western banking, and its first attempt to enter the sukuk market — a $2bn issuance programme registered with the Irish Stock Exchange three years ago — was dogged by suspicions that it might exploit Islamic finance.
Goldman chose itself, Abu Dhabi Islamic Bank, Emirates NBD, National Bank of Abu Dhabi and the investment banking arm of Saudi Arabia’s National Commercial Bank to arrange the investor meetings, the document from lead managers said. The sukuk would be issued through a vehicle called JANY Sukuk Co and be guaranteed by Goldman Sachs.
REUTERS
