Osborne mandates banks to arrange first Islamic bond to be issued in the West

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CHANCELLOR George Osborne has mandated banks to arrange a five-year £200m sukuk - the world’s first Islamic bond to be issued by a Western sovereign.

The Islamic bond could be issued in the coming weeks, subject to market conditions, The Treasury said in a statement.

The roadshow will start on June 17 in Jeddah and Kuala Lumpur, then moving to Riyadh, Dubai, Doha, and Abu Dhabi, ending in London on June 20.

A sovereign sukuk is the centrepiece of Prime Minister David Cameron’s bid to position London as a leading hub for Islamic finance, as competition heats up with financial centres in the Middle East and Asia.

The bond would be issued before similar transactions planned by Luxembourg, Hong Kong and South Africa, all keen to diversify their funding sources and tap liquidity provided by increasingly wealthy Islamic investors.

In January, the Government appointed HSBC to arrange the deal and it has now added four more banks to the syndicate: Qatar’s Barwa Bank, Malaysia’s CIMB, National Bank of Abu Dhabi and Standard Chartered.

The sukuk will use an ijara structure, a sharia-compliant sale and lease-back contract, allowing the rental income of three central government offices to underpin the transaction, a popular format among both sovereign and corporate issuers.

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