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LOLC Finance sets benchmark in Sukuk issuances in South Asia

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30 August 2016 12:03 am - 0     - {{hitsCtrl.values.hits}}

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LOLC Finance PLC has successfully issued a Rs. 500 million (US$3.37 million) Sukuk from the domestic market, setting a precedent for corporate Sukuk issuances in South Asia. 


Sukuk is commonly referred to as ‘Shariah compliant’ bonds which is a fast emerging source of alternative funding often referred to as Islamic Bonds. 


The Sukuk Al Ijarah issuance of LOLC Finance was subscribed entirely by the Bank of Ceylon. 
The Trustee to the issuance was HNB Custodial Services while Trillion Securities (Pvt) Limited acted as the financial adviser, arranger and lead manager. 

The legal aspect was handled by Nithya Partners. 


Elaborating on Sri Lanka’s first Sukuk Al Ijarah issuance, Krishan Thilakaratne, the Group Head of Islamic Finance of LOLC said: “As there has never been a Sukuk issuance in Sri Lanka, we had the challenge of drafting the agreements and arranging the parties. Further, we are building a fairly substantial Ijarah base and we have the capacity to go with a larger issue in the future. Ideally, we would like to get off shore investors buying the paper but there are hurdles to overcome such as exchange risk options.”


Having successfully raised Islamic capital from the domestic market, LOLC Finance is focusing on capturing foreign funds, in a Sharia’h compliant manner. Backed by Japan’s multinational conglomerate ORIX Corporation, the LOLC Group is renowned for its strong international funding base. 


Speaking about the landmark deal, Bank of Ceylon General Manger D.M Gunasekera said: “The experience and the learning curve of this joint effort is one of the convergences the industry is vying for and therefore others too can join hands with us for win-win deals.” 


Meanwhile, Sampath Kulatunga, Director / CEO of Trillion Securities (Pvt) Limited (TSL), the arranger and lead manager of the issue said, “The challenge to us was that this issue was the first ever Sukuk Ijarah receivable securitization transaction, structured in the Sri Lankan capital market.” 

 


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