May 22, 2018 / 3:17 AM / in a month

Kuwait Finance House sets up $3 bln sukuk programme

May 22 (Reuters) - Kuwait Finance House (KFH), the country’s second biggest lender by assets, has established a $3 billion Islamic bonds programme that would mark its largest foray into the market for sukuk.

KFH will issue the certificates via a special purpose vehicle incorporated in the Dubai International Financial Centre (DIFC), a state-owned free zone, according to the sukuk prospectus.

The certificates have been assigned a provisional (P)A1 senior unsecured long-term rating by credit rating agency Moody’s.

The transaction is to be arranged by KFH Capital Investment Company and Standard Chartered Bank. No date or initial size for an issuance was specified.

The programme allows for issuance in multiple currencies, including China’s renminbi, and uses a hybrid structure that combines sharia-compliant contracts known as wakala and murabaha.

Wakala is an agency-based structure where a portfolio of assets is managed on behalf of sukuk holders. Murabaha is a cost-plus-profit arrangement in which one party buys merchandise for another, selling it back at a pre-determined markup.

Such hybrid structures are now common among sukuk issued by Islamic banks to ensure their tradeability.

KFH has previously tapped the sukuk market through its Turkish subsidiary, Kuveyt Turk. (Reporting by Bernardo Vizcaino; Editing by Eric Meijer)

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