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Three Omani firms plan to float sukuks next year

by A E James
December 18, 2012 , 3 : 00 am

Abdullah Al Salmi Pic: AR Rajkumar/Times of Oman

Muscat: At least three Omani companies, including Tilal Development Company (TDC), are planning to float Islamic debt instruments or sukuks next year. "We have given initial approvals for Tilal Development Company and an institution to float sukuks," said Abdullah bin Salem bin Abdullah Al Salmi, Executive President of the Capital Market Authority (CMA).

He was talking to the media on the sidelines of an interactive session organised by the CMA. TDC earlier said that it is planning to float a RO50 million issue, which is seen by the end of January next year. Al Madina Financial and Investment Services is the lead arrangers of sukuk issue for TDC, which will use the proceeds of the issue for funding the expansion of its complex at Bausher.

Al Madina Financial and Investment Services Chief Investment Officer Khalid Ali Saif Al Yahmadi told Times of Oman on Monday that a semi-government entity is also considering the possibility of issuing sukuk to fund a green field manufacturing unit, which is coming up either in Sohar or Duqm.

"We already had some initial meetings with them and there is a general acceptance to the concept of sukuk," he added, without naming the company. Al Yahmadi said another family business, which is engaged in trading activities, also might consider sukuk as one of the avenues for raising fund for their expansion. But this issue is planned only for 2014.

He also said that Al Madina Financial and Investment Services is presenting the sukuk concept before several companies for meeting their fund requirements. "We are able to structure the deal, make sure that it is Sharia compliant and get the investors.. it is a one-stop-shop for floating Sharia products," added Al Yahmadi.

Al Salmi said only companies with SAOC or SAOG status will be allowed to float sukuks in the new regulation, like any other bond issue. Al Yahmadi said that floating bond issues for raising funds for expansion was not popular among the Sultanate's corporate sector due to two reasons only companies with SAOC and SAOG status are allowed to issue bonds and the size of the issue is limited to the size of the capital of the company.

"It is expensive to issue bonds in terms of transaction cost. If the size of the issue is small, it is cheaper and easier for companies to borrow from banks, than coming out with a bond issue." These conditions are aimed at protecting the interest of investors.

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