Kuwait Finance House (KFH) has established a $3 billion Islamic bonds programme that would mark its largest foray into the market for Sukuk
KFH will issue the certificates via a special purpose vehicle incorporated in the Dubai International Financial Centre (DIFC), a state-owned free zone, according to the sukuk prospectus, which have been assigned a provisional (P)A1 senior unsecured long-term rating by credit rating agency Moody’s, according to Reuters.
The programme allows for issuance in multiple currencies, including China’s renminbi, and uses a hybrid structure that combines sharia-compliant contracts known as Wakalah and Murabahah. The transaction is to be arranged by KFH Capital Investment Company and Standard Chartered Bank, although neither the date nor initial size for an issuance was specified.
Wakalah is an agency-based structure where a portfolio of assets is managed on behalf of Sukuk holders. Murabahah is a cost-plus-profit arrangement in which one party buys merchandise for another, selling it back at a pre-determined mark-up. Hybrid structures such as these are now common among Sukuk issued by Islamic banks to ensure their tradability, Reuters said.