Oman’s first sukuk approved

Oman’s first corporate sukuk has received regulatory approval and the 50 million rial ($130m) private placement aims to close next month.

The five-year sukuk will be issued by Tilal Development Co, a leading real estate firm, and the proceeds will be used to repay existing debt and expand the Muscat Grand Mall.

If it is successful, the issue could pave the way for other companies to sell Islamic bonds.

“We have already done our roadshows and also got some commitments from pension funds locally,” Mohsin Shaik Sehu Mohamed, head of Islamic finance at Al Madina Investment, told Reuters.

“Now the target is to close this deal. We are trying our best to close it in July.”

The sukuk, rated BBB+ by Capital Intelligence, will pay a 5% profit rate and use an ijara structure, a common shariah-compliant leasing arrangement.

Al Madina says it has other Omani sukuk in the pipeline, with one deal targeted for later this year.

“We have two more in the pipeline - one government-related entity and one family-owned company,” Mohamed said.

Omani domestic investors such as pension funds and insurance firms have expressed an interest and it could have a broader regional appeal, in particular from Qatar, Mohamed added.

The corporate sukuk could also be welcomed by local Islamic banks, which are eager for access to more shariah-compliant investment products while Oman’s Islamic money markets are underdeveloped.

There is talk of the government considering a sovereign sukuk, which is expected to be issued next year.