Kuwait Finance House has listed a 200 million dinar additional tier one sukuk on Boursa Kuwait, the first instrument to trade on the exchange's new debt instruments market. The issue carries an annual profit rate of 5.5 per cent paid semi annually, with a nominal value of 1,000 dinars per certificate traded in units of the same size and provision for early redemption.
The listing matters more for the market than for the issuer. Gulf debt capital markets have historically been dominated by issuance placed with institutions and held to maturity, often listed offshore in London or Dublin rather than at home. A functioning domestic listed debt market gives local investors a secondary price, gives the regulator visibility, and over time builds the yield curve that corporate borrowers need in order to price their own paper.
Additional tier one instruments sit in an unusual place in a bank's capital structure. They are perpetual, they absorb losses if capital falls below a trigger, and the issuer can suspend distributions without triggering default, which is why they pay more than senior debt. For an Islamic bank the structure has to achieve that economic profile within a sharia compliant form, and this issue uses a mudaraba structure to do it. The paper carries ratings cited as A2 from Moody's and A from Fitch, both with stable outlooks.
The transaction was arranged through KFH Capital and approved by Kuwait's Capital Markets Authority, with the Kuwait Central Securities Depository handling settlement. The listing was marked with a bell ceremony attended by Khaled Yousef AlShamlan, group chief executive of Kuwait Finance House, and Mohammed Saud AlOsaimi, chief executive of Boursa Kuwait.
Boursa Kuwait has been working for several years to broaden beyond equities, a process that runs through index classification, market infrastructure and the regulatory framework for new instrument types. Launching the fixed income platform with a large domestic bank's capital instrument is a deliberate choice: it puts a familiar credit and a well understood structure in front of local investors as the first test of the plumbing.
The tenor of the instrument was not stated in the listing announcement.
