First UK RMBS sukuk attracts institutional investor interest

Author: Olly Jackson | Published: 8 Feb 2018

UK-based Al-Rayan Bank has issued a £250 million ($347 million) sukuk using a residential mortgage-backed securitisation (RMBS). The financial institution predicts this could be the start of a raft of other Islamic banks entering the RMBS market.

It has appointed Standard Chartered to arrange investor meetings ahead of the issue. Moody’s has assigned a provisional Aaa rating for the sukuk, which is said to have generated investor interest from asset managers and fund managers globally, notably, a number of Islamic banks based in the Middle East. Early indications put pricing in the area of 80 basis points over the 3 month London interbank offered rate.

The issuance is backed by a portfolio of home purchase plans from clients in England and Wales, with loans set to mature in 2052. A special purpose vehicle will issue sukuk certificates backed by these loans.

Sukuk structure

The sukuk securitises diminishing musharakah contracts with Ijara...