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By Mirna Sleiman
DUBAI Feb 20 Saudi investors are warming
to a sale of $2 billion of Islamic bonds by U.S. investment bank
Goldman Sachs, banking sources told Reuters, lending support to
a sukuk which has run into controversy over whether it complied
with Islamic principles.
The bank has also been criticised for naming at least three
Islamic scholars as potential advisers on the sukuk even though
none had seen the prospectus.
"Despite all the criticism, GS will have no difficulty
selling the sukuk. They are in talks with Saudi investors and
may do a private placement," a senior Gulf banker involved in
the Islamic finance industry told Reuters on Monday.
He declined to be named because of the commercial
sensitivity of the subject.
Another Gulf banker, who advises wealthy Saudi individual
investors, said one of his clients had been approached. Saudi
investors were prepared to buy the sukuk, the banker said.
Goldman Sachs in London said it had no comment.
Goldman announced last October it would issue as much as $2
billion through sukuk, making it one of the first top Western
banks to raise money in that way.
Islamic finance is based on principles which ban the use of
interest and pure monetary speculation.
Although the sums involved are tiny in comparison to
conventional international bond issuance, sukuk has been a
relatively stable source of funding during the global financial
crisis because of its conservative investor base.
Goldman has said its sukuk could be denominated in United
Arab Emirates dirhams, dollars, Saudi riyals or Singapore
It has not disclosed a time frame for issuance and says
Islamic scholars have given the programme sufficient
certification to comply with sharia principles.
The first Gulf banker said Goldman believed enough wealthy
individual investors in Saudi Arabia were prepared to accept the
certification, despite the misgivings of some other investors.
Controversy over the permissibility of financial instruments
has characterised Islamic finance since it was born in its
modern form in the 1970s.
A range of scholars and industry bodies set product
standards which are sometimes contradictory and act as
guidelines rather than firm, enforceable rules.
A private placement would allow Goldman to deal directly
with a small number of investors, rather than offering the sukuk
to the Islamic investment community at large.