(MENAFN- Gulf Times) Qatar's second-biggest Islamic lender may sell the nation's first sukuk in more than 17 months, according to two people with knowledge of the matter.
Masraf Al Rayan has received proposals from banks for a benchmark sized, debut Shariah-compliant offering, the people said, declining to be identified.
The bank's spokesman didn't respond to questions by e-mail and telephone.
"There will always be appetite for sukuk, especially those from Qatar," Ahmed Shehada, the head of advisory and institutions at NBAD Securities, said by phone from Abu Dhabi on Tuesday. The brokerage is a unit of National Bank of Abu Dhabi, the region's second-biggest sukuk underwriter this year. "Given the country's rating and Masraf Al Rayan's consistent growth, the sukuk will be a success."
Investors have been starved of Islamic bonds after sales in the six-nation Gulf Cooperation Council dropped to $3bn this year, the lowest since 2011. Masraf Al Rayan's offering would end an issuance drought in Qatar, which is spending more than $200bn building stadiums, roads, railroads and even a new city before it hosts the 2022 FIFA World Cup.
Qatar International Islamic Bank (QIIB) and Qatar Islamic Bank (QIB) also plan to issue Shariah-compliant bonds, they said earlier this year without specifying a date.
Masraf Al Rayan is one of four Islamic banks in Qatar, which sits on the world's third-biggest natural gas reserves after Iran and Russia. The bank's profit climbed 18% in the first quarter to QR511mn ($140mn), it said on April 20.
The lender is rated A2 at Moody's Investors Service; Qatar's rating is Aa2, three levels higher. The country is one of six core markets in terms of Islamic banking assets, which Ernst & Young estimates will reach $1.8tn by 2019.
The lender hasn't mandated banks for the sale yet, and it has been months since QIB, the nation's largest Shariah-compliant lender, and QIIB announced plans for sukuk. QIB said on January 18 its board approved additional Tier 1 sukuk of as much as QR2bn, and QIIB's board recommended similar securities of as much as QR3bn, it said on February 8.
Seven Qatari borrowers have sold sukuk, compared with at least 35 in the UAE, data compiled by Bloomberg show. Ooredoo was the last Qatari issuer to tap the market when it raised $1.25bn in December 2013.
When it's sold, Masraf Al Rayan's sukuk will probably be priced similar to QNB's $1bn conventional debt due April 2020, Shehada said. The yield has dropped 67 basis points this year to 2.43% on Tuesday.
Masraf Al Rayan's sukuk would likely price between 90 to 120 basis points over midswaps for a five-year offering, he said. That's at least 140 basis points less than the average yield on Islamic debt in the Middle East, which rose nine basis points this year to 4.4% on Monday, according to JPMorgan Chase & Co's indexes.
"Given the low coupon they will pay, the issue would be more geared to institutions and pension funds," Shehada said. "A new issuer in Qatar means investors get to further diversify their sukuk holdings there."
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