February 22, 2018 / 4:52 AM / 6 months ago

Albaraka Turk raises $205 million via Tier 1 sukuk

Feb 22 (Reuters) - Turkish Islamic lender Albaraka Turk has raised $205 million worth of capital-boosting Islamic bonds, or sukuk, the first issuance in the country designed to qualify as Tier 1 capital, the bank said in a statement.

The lender said the perpetual sukuk, sold as a private placement and issued through an Irish-domiciled special purpose vehicle, would pay a 10 percent profit rate.

Islamic banks have been developing sukuk designed to meet Basel III banking standards being phased in around the world, helping them shift away from funding through retail deposits and short-term syndicated loans.

Albaraka Turk, a subsidiary of Bahrain-based Al Baraka Banking Group, previously secured a $213 million murabaha-based loan syndication in April of last year.

Turkey’s Islamic banks - known domestically as participation banks - have previously issued sukuk as Tier 2 capital.

The latest transaction could serve as a stepping stone for other banks to consider such hybrid instruments as a viable long-term capital raising tool, said Malek Temsah, assistant general manager of treasury and financial institutions at Albaraka Turk.

The sukuk uses a structure known as mudaraba, a type of investment management partnership in Islamic finance.

The lender appointed Standard Chartered Bank as global coordinator for the deal with Bank ABC, Emirates NBD, Qinvest and Noor Bank as lead managers. (Reporting by Bernardo Vizcaino in Sydney; Editing by Sunil Nair)

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