February 7, 2018 / 12:56 PM / a month ago

Al Rayan to price debut RMBS sukuk next week

SYDNEY, Feb 7 (Reuters) - Birmingham-based Al Rayan Bank plans to complete its debut sale of Islamic bonds next week aiming to raise 250 million pounds ($350 million) via residential mortgage-backed securities (RMBS), a bank official told Reuters.

The sukuk from Al Rayan, an Islamic bank owned by Qatar’s Masraf Al Rayan, would help diversify its funding and could pave the way for others to issue similar sukuk.

Bookbuilding was launched on Monday with indicative pricing in the area of 80 basis points over the 3 month London interbank offered rate (Libor), said Amir Firdaus, treasurer of Al Rayan Bank.

“This will be attractive to Islamic investors but will also be well received in the conventional RMBS market,” Firdaus said.

Al Rayan, one of five standalone Islamic banks in Britain, wants to grow its financing asset book to more than 2 billion pounds this year, from a current 1.8 billion pounds.

The amortizing financing deal is callable in 2021 with a 2052 maturity, and could qualify as a type of high quality liquid asset for regulatory purposes, said Firdaus.

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, Firdaus added.

“We see an opportunity to do this more in the future and a potential opportunity for other Islamic banks to tap into the RMBS market.”

The sukuk have preliminary ratings of AAA from S&P Global Ratings and Aaa from Moody’s Investors Service.

A handful of Islamic securitisations have been done in Saudi Arabia and the United Arab Emirates, with Malaysia’s Cagamas the only recurrent issuer of mortgage-backed sukuk.

Dubai-based Tamweel raised $300 million in 2007 via a mortgage-backed sukuk, while testing the market unsuccessfully in 2012. ($1 = 0.7162 pounds) (Reporting by Bernardo Vizcaino; Editing by Robert Birsel)

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