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Middle East

CASE STUDY: Turkey’s First Basel-III Compliant Tier II Sukuk - Albaraka Turk

Albaraka Turk saw strong demand from the MENA region for its US$250mn Basel III-compliant Tier II sukuk, the first seen from Turkey, against a backdrop of emerging market turmoil and political volatility.

Nov 11, 2016 // 2:00PM

Deal At A Glance

Deal Type: Tier II RegS Sukuk

Deal Structure: Wakala/Murabaha

Issuer: Albaraka Sukuk Limited

Obligor: Albaraka Turk Katilim Bankasi A.S. (ABT)

Governing Law: UK

Listing: Irish Stock Exchange

Transfer Agent: Deutsche Bank

Bookrunners: Barwa Bank, Dubai Islamic Bank, Emirates NBD Capital, Nomura International plc, Noor bank, Standard Chartered Bank, QInvest LLC

Global Coordinator: Standard Chartered Bank

Legal Advisors to JLMs: Clifford Chance LLP, Yegin   Çiftçi Attorney Partnership

Legal Advisor to Issuer: Norton Rose Fulbright,   Paksoy Ortak Avukat  Bürosu

Size: US$250mn

Tenor: 10 years

Yield: 10.5%

Spread: MS+891bp

Date of Issue: 30 November 2015

Use of Proceeds: To boost the bank’s capital base


On 23 November 2015, Albaraka Turk Katilim Bankasi A.S. (ABT) priced a US$250mn unsecured subordinated, Basel III-compliant Tier II sukuk with a tenor of 10 years.

The deal launched on 30 November 2015, and at the time was only the second Basel III-compliant Tier II deal to come out of Turkey, and the first in sukuk format.

Transaction Breakdown

ABT issued a US$250mn unsecured subordinated Basel III-compliant Tier II sukuk with a tenor of 10 years, with a one-time call option in 5 years (2020).

The sukuk saw strong demand from investors in the MENA region, and also attracted a large volume of high- quality Islamic accounts.

About 91% of the sukuk was picked up by accounts based in the MENA region, with the remaining 9% picked up by investors based in Europe.

Banks and private banks – both Islamic and conventional – made up the two largest investor types, anchoring the book from the outset.

Private banks accounted for roughly 55% of all orders placed on the sukuk, followed by other banks which placed about 35% of all orders.

Roughly 6% of the sukuk was placed with supranational agencies, while 4% was placed with fund managers.

“The sukuk received strong support from Islamic and conventional accounts from the GCC region, and while the price could be considered a bit high it is worth noting that the deal closed amidst significant volatility in emerging market assets, and one day before the market effectively closed for most issuers – when tensions escalated between Russia and Turkey,” explained Mustafa Çetin, Senior Vice President & Head, Financial Institutions and Investor Relations Departments, Albaraka Türk Katılım Bankası A.Ş.

Middle East CEE & Turkey

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