UK govt launches Islamic bond

UK govt launches Islamic bond

The UK government has become the first country outside the Islamic world to issue a sovereign bond that adheres to Islamic finance law, known as Shariah law, the UK Treasury said today.

An Islamic sovereign bond, known as Sukuk, has been issued to the value of £200m. It will mature on July 22 2019. The Treasury said that it had been sold to investors based in the UK and in the major hubs for Islamic finance around the world.

The Treasury reported 75 orders worth £2.3bn for the Sukuk, from a wide range of investors including sovereign wealth funds, central banks and international financial institutions.

The "profit rate" on the Sukuk has been set at 2.036%, a rate in line with gilts running for a similar five-year term. Initially the price reference was 0bps to 2bps above the equivalent gilt rate.

UK finance minister George Osborne said: "Today’s issuance of Britain’s first sovereign Sukuk delivers on the government’s commitment to become the western hub of Islamic finance and is part of our long term economic plan to make Britain the undisputed centre of the global financial system.

"We have seen very strong demand for the Sukuk, resulting in a price that delivers good value for money for the taxpayer. I hope that the success of this government issuance will encourage further private sector issuances of Sukuk in the UK."

The plan was first announced in October last year, while in January 2014 HSBC and Linklaters were appointed as structuring and legal advisers respectively. The Joint Lead Managers were Barwa Bank, CIMB, the National Bank of Abu Dhabi and Standard Chartered. The Sukuk is controlled through Treasury-owned HM Treasury UK Sovereign Sukuk PLC.

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