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UK firms may opt for sukuks
HABIB SHAIKH (Souq Sukuk) / 4 October 2010
A spate of corporate sukuks by UK organisations are expected in the coming few months following the recent launching of the first corporate sukuk out of United Kingdom by Gateshead-based International Innovative Technologies, or IIT.
A major GCC-based sukuk arranger, which is reportedly working on a corporate sukuk issuance for a UK healthcare company for the last year, hopes to launch the issuance in September. A London-based Islamic bank is also working on a sukuk issuance for a UK client which is near to being finalised.
While the IIT four-year Musharaka sukuk is modest by market standards with a total issue size of $10 million, Tom Wilkinson, chairman of IIT, is confident that there is potential for other UK companies to access Islamic finance including sukuk as an alternative source of funding.
Indeed, the company which specialises in making state-of-the-art eco-friendly industrial precision milling machines has gone to the international markets to raise funds at a time when small-and-medium-sized enterprises in the UK are finding it difficult to get credit and financing from the high street banks. IIT is a new technology development company specialising in design, precision engineering and manufacture of innovative products, including the m-series range of inertia mills and the c-series range of classifiers, which are used in the construction and waste recycling industries.
According to Wilkinson, historically venture capital and private equity funds have looked for certain board rights and controls, which were challenging to incorporate in a Shariah-complaint investment structure. “The investment into IIT via a Musharaka structure is more of a framework by which small, medium and large UK companies can pursue Islamic funding sources, in order to meet balance sheet, working capital, research and development and expansion capital requirements,” he explained.
He said that the proceeds of the IIT sukuk will be used as growth capital for the company. “IIT has developed innovative, patented, powder milling technology which can produce very fine powders at very low energy levels plus uniquely recycling waste products for reuse. For instance glass reinforced plastic scrap, instead of going into land fill, is grounded into a fine powder and recycled. Additionally, IIT is developing technologies which will significantly reduce waste streams from coal fired power stations,” he added.
The sukuk issue was placed privately with Millennium Private Equity Ltd, leading private equity firm based in the Dubai International Financial Centre and regulated by the Dubai Financial Services Authority. Millennium Private Equity Ltd is co-owned by United Gulf Bank and Dubai Islamic Bank. The issuance has a profit rate of 10 per cent per year and matures in 2014. It was also listed on the Cayman Stock Exchange on June 30.
The sukuk is essentially a convertible sukuk, whereby Millennium Private Equity Ltd can convert the sukuk into equity. Wilkinson said the conversion is based on certain performance milestones, subsequent to which Millennium Private Equity Ltd would receive agreed equity interest.
GUINEA: At this stage when the global sukuk market is growing education and knowledge, especially of Islamic Capital Markets, becomes a competitive advantage. The Islamic Markets Programme, which is held annually by the Securities Industry Development Corporation, the training and development arm of the Securities Commission Malaysia, is by far the best in the world and is aimed at helping participants to analyse the philosophy and fundamentals of ICM and to distinguish between its various products; to evaluate Islamic equity, sukuk and derivatives as alternatives means of financing and investment to conventional products; and to assess the significance and essentials of corporate governance, risk management and sound regulation in promoting Islamic markets. - firstname.lastname@example.org
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