Monday, October 1, 2007

Financing Saudi Arabia's Growth Through Sukuk

by Farhan Mahmood from Arab News

So far this year, 58 sukuk issues have raised over $20 billion. In the GCC alone, the sukuk market has accounted for $16.50 billion or 33% of the total global sukuk issuance. Increasingly, the takeovers of foreign firms by Gulf-based corporations are being financed with sukuk. For instance, last year’s takeover of P&O by Dubai Ports was financed with the issuance of a $3.5 billion convertible sukuk. What is driving this massive issuance of sukuk? Plainly, it is a combination of the economic boom being witnessed in the GCC coupled with an increasing acceptance of sukuk as a mode of financing this growth ... The issuance of sukuk on domestic and international capital markets is now often part of the funding package of major investment projects. In 2006, SABIC issued its first sukuk; a few weeks back, the petrochemicals giant issued another sukuk to finance its $11.60 billion acquisition of GE’s plastics business.

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