Estithmar Holding’s debut Sukuk offering is one for the books as it heralded a new chapter in Qatar’s Sukuk market, opening the doors for a new asset class in a market driven by financial institutions and foreign currency issuances, experts behind the deal tell VINEETA TAN.
The QAR500 million (US$137.36 million) Sukuk achieved several landmark milestones including the fact that it is Qatar’s first corporate Sukuk denominated in Qatari riyal; the first Qatari riyal debt instrument listed on the London Stock Exchange; and the first riyal Islamic offering opened to retail investors.
The uniqueness of the transaction, and stature of the issuer – a public-listed firm which became a household name for its active participation in preparing Qatar for the 2022 FIFA World Cup – made it incredibly attractive to both institutional and retail investors resulting in overwhelming demand.
“This was highlighted by the fact that after the first QAR500 million issuance, this was followed by a tap issuance to clear any excess demand that could not be met in the first transaction,” shares Hadi El Kadi, a senior associate in deal advisory at Al Rayan Investment, one of the arrangers of the deal.
The tap issuance was mainly driven by retail demand, which is a positive signal for the Qatari Sukuk market which has long been an institutional play.
“We’ve done well in terms of marketing Sukuk as a new product to retail investors in Qatar especially to those who are not familiar with this asset class, but this is just the beginning and we see a promising future for Sukuk going forward,” believes Tahir Hayat Pirzada, the general manager of group treasury and financial institutions of Masraf Al Rayan.
The Qatari conglomerate – which boasts 66 companies across healthcare, services, ventures and specialized contracting – had initially explored the idea of raising an equity round rather than debt to fund its expansion plans but ultimately chose the Sukuk route due to a variety of factors including prevailing market conditions and an opportunity to diversify its funding sources.
“They wanted to remain within the Islamic universe and within the investor base in Qatar; there is a fair amount of sensitivity,” Akber Khan, the acting CEO of Al Rayan Investment, explains. “If you have a Sukuk, you have access to a far larger market than if you have a bond.”
But being the first is not easy.
One of the main challenges in bringing this deal to market was that there was no clear and direct pathway to list a Qatari riyal paper internationally as Clearstream did not accept the local currency as a settlement currency.
“This was very unusual because usually Clearstream and Euroclear work together to seamlessly settle currencies – it was just an anomaly that Euroclear would clear the currency and Clearstream wouldn’t,” explains Lee Irvine, a partner at Simmons & Simmons, who advised the deal’s arrangers.
Nonetheless, after multiple discussions, Clearstream came to an agreement, which allowed the Sukuk to be listed on the London Stock Exchange’s International Securities Market and marked the first time the Qatari riyal has been cleared through Eurosystems.
While it is still not as straightforward as it should be – the bridge between Euroclear and Clearstream is not yet operational – there are bespoke settlement processes for the Qatari riyal as the currency of choice and this opens new pathways for Qatari corporates to issue in their home currencies and in the global market.
“At Al Rayan Investment, we’re already working with other issuers who will be issuing in Qatari riyal,” Akber reveals. “The reason why we were so excited about this issuance is because it opened the door and paved the road for what we think will be a very exciting new sub asset class. We’re excited about the demand from issuers as well as hopefully investors.”
To listen to the full roundtable discussion on the landmark Estithmar debut Sukuk, log on to IFN Podcast.
| Estithmar Holding’s debut Sukuk QAR500 million under QAR3.4 billion program  23rd September 2024 | |
| Issuer | Estithmar Sukuk |
| Obligor | Estithmar Holding |
| Tenor | Three years |
| Profit rate | 8.75% |
| Bookrunners and arrangers | Al Rayan Investment and The First Investor |
| Bookrunner | Lesha Bank |
| Legal counsel for the issuer | White & Case |
| Legal counsel for the arrangers | Simmons & Simmons Middle East |
| Ratings | ‘qaBBB (stable)’ – Capital Intelligence |
| Listing | London Stock Exchange’s International Securities Market |
