Moody’s move whets appetite for sukuk certificates in liras

ISTANBUL - Hürriyet Daily News

Traders work at Sudan’s Khartoum Stock Exchange. Lira bases sukuk certificate issues will allow Turkey’s participation banks to issue securities in line with Islamic principles. REUTERS photo

Moody’s upgraded yesterday its outlook for Turkey’s sukuk issue to positive and gave it a “Ba1” rating on the heels of news that the Turkish Treasury had mandated three international banks – Citigroup, HSBC and Liquidity House – to issue “sukuk certificates,” or Islamic banking vehicles.

The new issue is expected to be completed in two weeks as Turkish banks are eagerly waiting for the Turkish Treasury to finalize the process for a Turkish Lira-based sukuk issuing regulation. Deputy Prime Minister Ali Babacan had previously said on several occasions that the Treasury was working to shape the regulation before the end of 2012.

‘Sukuk issue to attract foreign investors’

When asked by the Hürriyet Daily News as to why the mandate was first given to foreign banks, Türkiye Finans General Manager Derya Gürerk said he believed that the sukuk issue was similar to the Treasury’s previous Eurobond issues and was geared more toward attracting foreign investors.

“It’s only natural that to reach a large foreign investor base and capital markets, the Treasury mandated foreign banks,” he said in a written statement to the Daily News. The bank is hopeful that there will be strong demand for the Treasury’s new issue and that this, in turn, will speed up the sukuk process in the Turkish market.

“Furthermore, this issue will have a positive impact on foreign investor perceptions and, going forward, we predict that sukuk issues by Türkiye Finans, as well as other participation banks, will be able to attract a lot of interest,” he said.

Feyzullah Eğriboyun, vice general manager of Bank Asya, another leading Turkish participation bank, also commented to the Daily News on the sukuk issue. “I hope that once our Turkish banks receive the necessary know-how in this field, then we will be able to play a role in issuing sukuks to other countries in the international arena,” he said, calling the new issue both a “benchmark” and “road map” for Turkey.

According to Eğriboyun, lira-based sukuk certificates will provide participation banks with the opportunity to issue securities that are in line with Islamic principles.

Ayhan Keser, vice general manager of Albaraka, another Turkish participation bank, said his bank was eagerly awaiting a lira-based sukuk issue.

“At Albaraka, we are especially following developments regarding a Turkish Lira sukuk issue and expect it to happen very soon. This issuance of sukuk rent certificates are both a necessity and positive development for all participation banks,” said Keser.