Albaraka Turk, the Turkish subsidiary of Bahrain’s Al-Baraka Bank, is set to complete a $100m Islamic loan by early September.
The deal is already oversubscribed, with final responses from several banks still outstanding. Sources close to Al-Baraka say the deal may now be increased in size to take up some of the extra cash on offer.
The loan is structured as a murabaha, which involves the lenders buying a commodity and immediately selling it to the borrower. They then agree to be repaid at a fixed price based on the cost of the commodity plus profit. The deal has a tenor of 12 months and pays an all in margin of around 3 per cent. Banks have been invited to fund the loan in either dollars or euros
Bahrain’s Arab Banking Corporation (ABC), the UAE’s Noor Islamic Bank (NIB) and the UK’s Standard Chartered are leading the transaction. One source close to Al-Baraka says, “There has been a lot of commitments from regional banks and also some European ones because they like the short tenor and the good return.”
The proceeds from the deal will be used to fund lending in Turkey.