Bank Islami is planning to issue Additional Tier 1 Modaraba Sukuk to raise Capital for its Capital Adequacy Requirements.
The Sukuk Issue will be Unsecured, perpetual, Subordinated, Non-cumulative and contingent, convertible listed Mudaraba Sukuk Additional Tier 1 Capital, amounting to Rs. 2 billion including green shoe option of Rs. 500 million.
The Profit rate on the issue would be 3 Months KIBOR + 2.75%. The bank is currently approaching Financial Institutions for raising the required funds. However, it has retained the option to raise funds from the Public through IPO as well.
The Sukuk will be issued under State Bank of Pakistan Basel III Guidelines which states that Upon reaching the point of non-viability (PONV), at its option, SBP willfully and permanently converts the Additional Tier 1 Capital into common shares of the issuer and/or have them immediately written off (partially or full). Sukuk is subject to lock-in clause which stipulates that no payments will be made if doing so results in a shortfall in the issuer’s Capital Adequacy.
Bank Islami is the 2nd Largest Islamic Bank in Pakistan with Total Assets of Rs. 227 Billion. Its Capital Adequacy Ratio stood at 16.1% at Mar-19 end. The Bank operates under Shariah Principles and has in place Shariah Compliance mechanism. Mufti Irshad Ahmad Aijaz heads he Shariah Board of the Bank.
The Sukuk has been rated “A-” by Pakistan Credit Rating Agency (PACRA), two levels below the Banks own rating of A+.