AMJ has advised the Oman Government and Sovereign Sukuk Company on the sale of US$1.5billion 5.92% sukuk certificates due 2025 and the update of its unlimited sukuk-al-ijara trust certificate issuance programme (Programme). The issue at the end of October 2018, received orders in excess of US$3.9bn according to Oman’s Ministry of Finance, and was rated BBB and Baa3, respectively by Moody’s and Fitch credit rating agencies.

The AMJ team was led by senior partner, Mansoor Malik supported by senior associate Asad Qayyum and associate Khalid Al Abri.  Clifford Chance acted as international counsel to the Government and issuer.

This is the second issuance under the Programme set up in 2017. AMJ also advised on the Oman law aspects of establishing the Programme and the subsequent drawdown of US$2 billion trust certificates which settled on 1 June 2017 and which marked the largest-ever sukuk issuance by the Sultanate.

This sukuk issue is Oman’s second foray into the international debt capital markets in 2018 following a jumbo US$6.5 billion conventional bond issue in January 2018, the country’s largest ever debt sale. Listed on Euronext Dublin (formerly the Irish Stock Exchange, the bond was sold in tranches of $1 billion 3.875% notes due 2022, $2 billion 5.375% notes due 2027, and $2 billion 6.5% notes due 2047. AMJ acted as Oman counsel for the Government on the establishment of a Global Medium Term Note Programme for Oman and the jumbo bond issuance thereunder.

AMJ’s team comprised senior partner, Mansoor Malik supported by senior associate Asad Qayyum. Clifford Chance acted as international counsel to the Government and issuer.

AMJ acted as Oman counsel to the issue manager and joint lead manager on the debut sukuk offering by Mazoon Electricity Company S.A.O.C. The landmark transaction marks the first international corporate sukuk issue out of Oman, and the first Reg S/144A corporate sukuk out of the MENA region since May 2016.

The ten-year Reg-S/144A sukuk certificates were successfully priced on 1 November 2017 and the profit rate for the certificates was set at 5.2 per cent.

The sukuk offering was based on the Shariah-compliant ijarah structure and the certificates were rated Baa2 (negative) by Moody’s Investor Services and BBB(negative) by Fitch Ratings.

Robust investor demand translated into a final order-book of approximately US$5bn from 300 orders, representing more than ten times oversubscription. The sukuk certificates were listed on the Irish Stock Exchange. The issuance was managed by Mazoon Electricity Company and Nama Holding along with JP Morgan Securities plc, Bank Muscat, KFH Capital Investment and First Abu Dhabi Bank acting as joint lead managers and Noor Bank and Warba Bank acting as co-managers.

The fundraising programme is expected to support the Mazoon Electricity group’s electricity transmission and distribution networks investments in Oman.

Mansoor Malik led AMJ’s team which included senior Islamic Finance associate Asad Qayyum. AMJ’s dedicated Islamic Finance team, the only one of its kind in Oman, has acted on a number of sukuk issuances in Oman in recent years including the Oman government’s US$2 billion international sukuk in 2017, US$500 million international sukuk in 2016 and the global award-winning US$650 million maiden sovereign sukuk in 2015.

AMJ has advised the Government of Oman and the issuer, Oman Sovereign Sukuk Company, on the Omani law aspects of establishing an unlimited sukuk alijarah trust certificate issuance programme, and the debut US$2bn international sukuk issuance under the Programme. The Programme was listed on the Irish Stock Exchange in mid-May and followed by the US$2bn sovereign issuance which settled on June 1.

The sukuk facility, which has a seven-year tenor and profit rate of 4.397 percent, was effected under Rule 144A and Regulation S and listed on the Irish Stock Exchange.

The final order book was reportedly in excess of US$6.9 billion, more than three times the issue size, which demonstrates strong international demand for Oman’s high-yielding debt despite the country’s recent credit downgrade by Standard and Poor.

The transaction marks a number of firsts; the Programme is the first of its kind established by the Government; the sukuk issuance is Oman’s largest-ever; and the Sovereign’s first public offer of sukuk in the international market. The issuance marks Oman’s second foray into the international debt capital markets this year following a US$5 billion multi-tranche conventional bond sale in March upon which AMJ also advised. The funds raised by the two issuances are expected to meet a significant portion of the Sultanate’s requirements for 2017.

Mansoor Malik, managing partner, supported by senior Islamic Finance associate Asad Qayyum acted as Oman counsel to the Government and the issuer. Clifford Chance acted as international counsel. Alizz Islamic Bank, Citi, Dubai Islamic Bank, Gulf International Bank, HSBC, JP Morgan and Standard Chartered Bank were the sukuk book-runners.

In mid-2016, AMJ acted as sole counsel to the government on the Sultanate’s first international US$500 million sukuk issuance, which was privately placed. In two earlier ‘first of a kind’ transactions, AMJ advised the issue manager and joint lead managers on Oman’s debut US$648 million sovereign sukuk in 2015 and on Oman’s first-ever corporate issuance in 2013.

AMJ acted as sole Omani Counsel to all the parties on the Oman government’s recent US$500mn sukuk issuance. The sovereign sukuk issuance, Oman’s first US dollar-denominated sukuk issuance, was privately placed by Oman Sovereign Sukuk S.A.O.C, a special purpose vehicle incorporated in Oman and wholly owned by the Government of Oman.

The certificates were priced with a profit rate of 3.5% per annum, payable semi-annually. As in the case of Oman’s debut sovereign sukuk, the certificates are based on an al-Ijarah structure. The tenor is 6 years with maturity date of July 14, 2022.

Standard Chartered Bank acted as lead manager and placement agent for the issuance and Deutsche Bank as the certificate-holders’ agent and principal paying agent.

The purpose of this sophomore issuance is to finance ongoing development projects as well as to raise Oman’s profile in international debt markets. The issuance met with strong demand from investors despite a Baa1 rating by Moody’s compared to its A1 rating for the previous sovereign issuance.

Commenting on the deal, AMJ managing partner, Mansoor Malik, said, “It is a testament to investor confidence in Oman’s stable outlook and the government’s risk profile that, despite the rating downgrade, this international issuance achieved the same pricing as the previous sovereign issuance. We are pleased to have played our part in another landmark transaction in Oman’s Islamic finance space and to assist efforts to maintain forward momentum in the economy during challenging times.”

Mansoor Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior Islamic Finance associate Asad Qayyum. The same team acted as Oman Counsel to the issue manager and joint lead managers on Oman’s debut sovereign transaction in 2015.

Allen and Overy acted as International Counsel for Standard Chartered Bank and Clifford Chance as International Counsel for Oman Sovereign Sukuk S.A.O.C and the Government.

A detailed regulation governing the issue and management of sukuk transactions came into force on April 11, 2016. Issued by the Capital Market Authority (CMA), the body authorised to regulate sukuk by an earlier amendment to the Capital Market Law (Royal Decree 59/2014), this is the latest development in Oman’s evolving Islamic regulatory landscape. Investor protections and procedural clarity introduced by the new rules are forecast to spur sukuk issuances particularly among private sector corporates seeking to diversify their financing bases and risk.

The new regulation codifies the trust structure to be adopted for an issuance and the powers and duties of the trustee to manage and invest the trust property and allows the issuance of a sukuk programme. It details the procedure for applying to the CMA for the issuance approval and grant of a licence to establish a special purpose vehicle in the form of a limited liability company or any other dedicated legal entity. The choice of shariah supervisory board (SSB) tasked to ensure that the issuance is shariah-compliant, is left to the issuer. Sukuks may be denominated in omani rials or a foreign currency. There is no restriction on the amount of the sukuk based on the beneficiary’s capital. The CMA has the option to require the issue to be credit rated.

The new regulation will provide a much-needed liquidity management tool and investment avenue base for both conventional and shariah-compliant investors. As a late entrant to the Islamic finance segment, Oman has benefited from the experience and best practice in other jurisdictions and this latest legislative move is no exception. The detailed and transparent nature of the regulation is expected to provide additional comfort to investors and give Oman an edge over regional sukuk markets which lack dedicated sukuk regulations and which, instead, issue sukuk by reference to conventional bond regulatory frameworks with shariah-compliant add-ons. According to Kemal Rizadi Arbi, an adviser at the CMA, “We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy”.

Since this landmark development, approval has been granted for a major corporate to issue a US$150 million sukuk by way of private placement and interest among Oman companies to tap into capital market financing is rapidly rising. For more information on sukuk and other Islamic finance instruments, contact Mansoor Jamal Malik or Asad Qayyum.

AMJ acted as Oman Counsel to Bank Muscat as issue manager and joint lead manager with Standard Chartered Bank on the first-ever sukuk offering by the Omani Government. The OMR200 million (US$517.17 million), 5-year benchmark sovereign sukuk issuance was oversubscribed close to 1.7 times, attracting 22 orders totalling OMR336 million (US$869.75 million) from a wide base of both conventional and Islamic institutions during the subscription period, which ran from Oct. 8 to 22.

The Ministry of Finance expanded the program by 25% to OMR250 million (US$647.13 million) at a yearly 3.5% cut-off yield to accommodate the strong order book. Results of the sale and allocations are awaited.

AMJ’s role included advising Bank Muscat and Standard Chartered on the listing, regulatory and settlement mechanics of the sukuk issue under Omani law as well as on Omani law aspects of the transaction structuring and documentation. Since this was a debut sovereign issue and as the draft sukuk regulations circulated by the Capital Market Authority are not yet in final form the transaction raised a number of novel issues, both substantive and procedural. The issuance also set the record for being the first debt capital market instrument – Islamic and conventional – to be priced through a book-building process with a uniform price auction.

Commenting on the deal, AMJ managing partner, Mansoor Malik, said: “We are pleased to have been involved on this ground-breaking, sukuk issuance which involved a number ‘firsts’ and a steep learning curve for all stakeholders. As such, it establishes a useful benchmark and precedent which we expect to spur future issuances, both by government and private sector.”

The issuance which is rated A1 by Moody’s Investors Service, in line with the Sultanate’s long-term issue rating, is seen as a key development for Oman’s capital markets, broadening Shari’a compliant investment avenues for private and public players, allowing them to diversify their financing base and spread risk.

Mansoor Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior Islamic Finance associate Asad Qayyum. Allen and Overy acted as international Counsel on the transaction.

Royal Decree 59/2014, which came into force on November 11, has introduced important amendments to Oman’s Capital Market Law (CML).

These include changes in applicable law concerning acquisitions of significant stakes (25% and above) in public joint stock companies. The changes expand the information that a prospective acquirer needs to provide the Capital Market Authority (CMA) in its application for the CMA’s consent to the acquisition and introduce additional obligations that the prospective acquirer needs to fulfill in relation to the acquisition.

Other amendments are:-

• changes to the protocol for constituting the board of directors of the Muscat Securities Market;
• inclusion of new provisions in the CML which deal with the issuance, listing and trading of Sukuk;
• empowering brokers to sell securities purchased on behalf of a client, which are not paid for (i.e. there is a client default) instead of merely allowing a freeze on dealing with such securities as was the case previously;
• augmenting the powers of the CMA to investigate offences and sanction offenders.

For more on the implications of the changes or any aspect of Oman’s capital markets law, contact Mansoor Malik or Ardeshir Patel.

Al Madina Investment recently organised an event to celebrate the issue of the first sukuk in Oman. At the event which was attended by Sheikh Abdullah Salim Al Salmi, the executive president of the Capital Market Authority, AMJ received an award for its role advising Al Madina on the Oman law aspects of this ‘first of its kind’ deal.

Al Madina acted as the principal advisor, joint lead arranger and joint lead manager for the 50 million rial ($130 million) sukuk issue by Omani real estate developer, Tilal Development Company. The proceeds of the sukuk issue will be used to finance the expansion of Tilal’s flagship mixed-use development comprising residential and retail units as well as the Muscat Grand Mall shopping complex.

The sukuk issue is seen as an important landmark in the development of the nascent Islamic finance industry in Oman and one which paves the way both for further corporate sukuk issues as well as a soveriegn sukuk mooted for 2014.

AMJ advised on the Omani law aspects of a 50 million rial ($130 million) sukuk (Islamic debt capital market instruments) the first of its kind in Oman arranged by Al Madina Investment SAOG for Omani real estate developer Tilal Development Co SAOC.

The five-year sukuk, offering a profit rate of 5 percent and based on an ijara structure, a leasing arrangement commonly used in other Islamic markets, was privately placed with investors. Tilal, 40 percent-owned by sovereign wealth fund Qatar Investment Authority, will use proceeds from its sukuk to expand the Tilal Complex in Muscat which includes the Muscat Grand Mall as well as residential and office space. This pioneering corporate sukuk issue involved complex issues arising from the absence of a sukuk regulatory framework in Oman.

It comes as the Central Bank of Oman executive president, Hamoud Al Zadjali announced the formation of a panel to look into issuing a sovereign sukuk in the coming year.