Oman sets dates for sovereign sukuk

06 October 2015

Moody’s provisionally rates sukuk at A1

  • Oman’s Finance Ministry will open subscription for the country’s first sovereign sukuk between 8 and 22 October
  • The issuance size will depend on subscrition levels
  • The five-year ijarah sukuk have been provisionally rated A1 by US-based Moody’s Investors Services

Oman’s Finance Ministry will open subscription for the sultanate’s first sovereign sukuk on 8 October, until 22 October.

The issuance size will be set depending on interest during the book-building process.

The ijarah sukuk will have a five-year tenor. To issue the instrument, a special purpose vehicle Oman Sovereign Sukuk, wholly-owned by the Finance Ministry, was established. The sukuk will be listed on the Muscat Securities Market.

US-based Moody’s Investors Services provisionally rated the sukuk as A1, in line with Oman’s sovereign rating and other senior unsecured debt. Oman has low government debt, but the sharp fall in oil revenues and high spending are a concern.

Local Bank Muscat is the sole issue manager. The joint lead managers are Bank Muscat and its Islamic window Meethaq, and UK-based Standard Chartered Bank.

The issuance will support the domestic Islamic finance sector, which lacks liquid assets to invest in.

“The government has studied the Islamic finance industry in the country and identified a need for investment avenues for Islamic financial institutions, Islamic funds and takaful operators in Oman to deploy their excess funds in a shari’a compliant manner in the country,” said Mohammed Jawad bin Hassan, advisor to the Finance Ministry and chairman of the Sukuk Committee. “The debut sovereign sukuk is an important step in achieving this objective and also supports the government’s objective of developing the capital market in Oman.”

The Central Bank of Oman issued RO300m ($779m) of five-year government development bonds on 9 August. They had a coupon rate of 3 per cent and an average yield of 2.5 per cent. This brought total sovereign issuance for 2015 to RO500m.

Muscat is using the funds to finance a growing budget deficit. The deficit reached RO1.9bn for the first half, compared to a yearly projection of RO2.5bn, or 8 per cent of GDP.

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