Al Rayan Bank UK which is 68.84% owned by Masraf Al Rayan Q.P.S.C. (Qatari Public Shareholding Company) announced that it is about to complete the first ever issuance of Sukuk valued at £250 Million through residential mortgage backed securities (RMBS: the Islamic Sharia compatible alternative). Thus, Al Rayan Bank UK will be the first bank to issue Sukuk outside an Islamic country and it will be the largest ever Sterling Pound issuance of Sukuk by a UK entity.
Al Rayan Bank- UK took this step in order to diversify its sources of funding and to pave the way forward for other Islamic banks to be able to issue similar Sukuk in an effort to encourage Islamic banking in the UK.
The book-building was launched with an indicative pricing of 80 basis points over the 3 Months LIBOR. This is expected to be very attractive for investments and should be well received even in the conventional mortgage-backed securities market.
The bank is expected to grow its financing assets book to more than 2 billion pounds this year, from a current 1.8 billion pounds.
The Sukuk certificates will be issued via a special purpose vehicle backed by a portfolio of home purchase plans from clients in England and Wales.
Such asset-backed transactions are relatively rare in Islamic finance, but depending on market conditions the bank could issue another Sukuk in late 2019. The bank believes that there will be more opportunities to issue Sukuk in the future and a higher potential for other Islamic banks to tap into the RMBS market.
The Sukuk by Al Rayan Bank UK have a preliminary rating of AAA from S&P Global Ratings and Aaa from Moody's Investors’ Services.