Islamic finance: Dar Al Arkan sukuk breaks Gulf drought
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Islamic finance: Dar Al Arkan sukuk breaks Gulf drought

Dar Al Arkan’s sukuk could have hardly come at a better time for Saudi Arabia.

The debt troubles of the Saad and Al Gosaibi groups have alerted international banks to what has been seen as a relatively low level of corporate governance in Saudi Arabia.

But the issuance of a $450 million, five-year 144a sukuk by developer Dar Al Arkan would not have been possible if the firm did not comply with US-approved standards of accountancy and management. It was the first Saudi corporation to formally roadshow a bond in the US. The roadshow also went to Europe and Asia.

The sukuk has an annual profit margin of 10.75% payable twice a year. Bahrain-based investment bank Unicorn, Deutsche Bank, and Goldman Sachs managed the issue, which was in a dual ijarah and murabaha Islamic structure.

But for the Greek crisis, the issuer would probably have been able to increase the size of the sukuk, says a banker close to the deal. But most deals in the second week of February, when the sukuk was issued, were pulled from the market altogether. This included a proposed issue by Bahrain’s United Gulf Bank.

First of the year
This was the first Gulf debt issuance to be closed in 2010.

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