With Qatar setting new benchmarks for the Shariah-principled debt, its oil and gas flagship Qatar Petroleum (QP) is fast readying up to float its sukuk, it is learnt.

“Following the considerable success of the new sovereign sukuk, the country’s national oil and gas flagship QP is also expected to place its first sukuk bond sometime in the second half of 2012,” Commerzbank chief analyst Apostolos Bantis said.

In early July, Qatar returned to the international sukuk market and successfully priced a $ 4bn dual-tranche, making it the largest ever international Shariah-principled debt raising and created a new benchmark in terms of size and pricing, according to him.

The new Qatari sukuk received very strong demand with the final order book reaching close to $ 25bn and good geographic diversification in the final allocation and the five-year sukuk tranche was priced to yield 2.1% and the 10-year at 3.24%, setting record low rates for Qatari sovereign bonds, Commerzbank said in a report.

It was also the lowest-fixed coupon rate paid by any GCC (Gulf Co-operation Council) issuer to date in the dollar bond market, he said, adding more importantly the new sukuk was priced inside Qatar’s existing curve, with the new five-year tranche issued at a 15 basis points discount and the 10-year tranche at a 10 basis points discount over Qatar’s similar-maturity conventional eurobonds, the analyst said.

However, it could not be ascertained to what extend the QP would go in for sukuk.
Earlier in a report in Euromoney magazine, Qatar Petroleum finance director Abdulrahman al-Shaibi said sukuk was an important avenue for it to tap as it saw increasing liquidity in the Islamic finance market.

He had said the sukuk issuance would be facilitated and backed by abundant assets the oil company have.

Sukuk, which is still a very small and relatively young market in the context of global fixed income, has shown strong growth dynamics, Commerzbank said.

Islamic bond issuance surged by an average annual rate of 40% over the past few years and is expected to comfortably surpass the $ 100bn benchmark in 2012, it added.

“We see this strong growth continuing over the medium term, fuelled by ample liquidity in the GCC and Asian regions along with a rising trend of sovereign and government-related issuers tapping the sukuk market,” it said.

The large pool of funds raised by various governments to absorb excess liquidity, along with the broadening of the sukuk market into new jurisdictions, has played a key part in the recent surge of sukuk issuance, according to Bantis.

The Middle East and North Africa region, and more specifically the GCC, is making a strong comeback as a major sukuk issuer, after a notable slowdown in 2009 in the aftermath of the Dubai debt crisis.

The GCC has been a key market with total sukuk volumes growing by 6.1% to $ 14bn in the first half of this year, Commerzbank said, adding Saudi Arabia, in particular, reported the highest growth with close to $ 9bn of new issues outpacing the UAE which has historically been the largest Sukuk issuer in the Gulf region.