The contest between DIB and CIMB Islamic for best sukuk house could not have been tighter. However, the standout deal over the past 12 months was DIB’s role as co-lead manager of a $600 million issue for the government of Malaysia. CIMB has failed to make significant strides in the Gulf, while DIB was able to snatch business from CIMB’s own backyard. Aref Kooheji, DIB’s executive vice-president of investment and corporate banking, says that DIB expects to do more deals in Malaysia and Asia more broadly in the future. Having lead managed the world’s only $1 billion sukuk al ijara, critics argued that DIB and other Islamic banks should be getting involved in more innovative sukuk deals rather than run-of-the-mill transactions. DIB responded to its critics with a string of landmark Islamic bond issuances between December 2004 and November 2005.
Among its achievements was dissuading the Dubai Metal and Commodity Centre from issuing a sukuk al ijara. DIB argued that as a newly established regulatory authority, the DMCC needed a sukuk to fund the construction of its building, and the bank eventually acted as lead manager and bookrunner for the world’s first international sukuk Al Musharaka, the DMCC’s gold-backed $200 million sukuk. It was also the UAE’s first rated sukuk to get an A rating from Standard & Poor’s.
DIB acted as sole lead manager and joint bookrunner for Emirates Airlines’ seven-year $550 million sukuk, the first sukuk issued by an airline that also replicates the sukuk al musharaka concept pioneered in the DMCC deal. This was the world’s longest tenor international corporate sukuk issue and attracted strong interest not only from the Middle East, but also from several European and Asian investors. DIB managed to price the deal at 75 basis points over US Libor, despite the airline having issued a $500 million bond in 2004 priced at 80bp with a maturity of five years. Other deals involved acting as joint lead manager for the Islamic Development Bank’s $500 million sukuk (alongside CIMB); and as co-manager of the government of Pakistan’s $600 million sukuk.
Aref says DIB’s strengths in sukuk are “innovation, turn-around and distribution”. The bank has been successful at widening the investor base for sukuk, he adds, thus increasing awareness of Islamic finance outside its traditional markets.
