Omani Firm Plans To Issue Country’s First Sukuk

Oman’s Al Madina Real Estate plans to issue the country’s first sukuk or Islamic bond in the first quarter of next year, its chief executive told Reuters on Wednesday.

Oman is about to introduce Islamic finance, becoming the last of the wealthy Gulf Arab states to do so, and the government is expected to issue regulations covering the industry in coming months.

The company plans to issue a five-year, $130 million sukuk through its sister firm Tilal Development Co, said chief executive Abdlrehman Awadh Barham.

The financial arm of the group, Al Madina Financial & Investment Services, is mandated to arrange the sukuk with other underwriting banks expected to be announced in coming weeks, he added.

“We are very positive about the market and the new Islamic banking environment,” Barham said.

Proceeds from the sukuk will help fund the Tilal Al Khuwair residential and commercial center, which the company says will become the largest commercial-residential complex in downtown Muscat.

Sukuk are expected to be welcomed by local Islamic banks, which are eager to gain access to more sharia-compliant investment products while Oman’s Islamic money markets are underdeveloped.

The company also plans a public offer of shares but its timing is subject to market conditions and regulatory approval, Barham said.

A sukuk issue could improve the prospects of the IPO, because assets would be pledged to back the sukuk and limit the amount of leverage that the company could take, improving its appeal to investors, Barham added. “Sukuk should make it more attractive.”