AMJ has advised the Oman Government and Sovereign Sukuk Company on the sale of US$1.5billion 5.92% sukuk certificates due 2025 and the update of its unlimited sukuk-al-ijara trust certificate issuance programme (Programme). The issue at the end of October 2018, received orders in excess of US$3.9bn according to Oman’s Ministry of Finance, and was rated BBB and Baa3, respectively by Moody’s and Fitch credit rating agencies.

The AMJ team was led by senior partner, Mansoor Malik supported by senior associate Asad Qayyum and associate Khalid Al Abri.  Clifford Chance acted as international counsel to the Government and issuer.

This is the second issuance under the Programme set up in 2017. AMJ also advised on the Oman law aspects of establishing the Programme and the subsequent drawdown of US$2 billion trust certificates which settled on 1 June 2017 and which marked the largest-ever sukuk issuance by the Sultanate.

This sukuk issue is Oman’s second foray into the international debt capital markets in 2018 following a jumbo US$6.5 billion conventional bond issue in January 2018, the country’s largest ever debt sale. Listed on Euronext Dublin (formerly the Irish Stock Exchange, the bond was sold in tranches of $1 billion 3.875% notes due 2022, $2 billion 5.375% notes due 2027, and $2 billion 6.5% notes due 2047. AMJ acted as Oman counsel for the Government on the establishment of a Global Medium Term Note Programme for Oman and the jumbo bond issuance thereunder.

AMJ’s team comprised senior partner, Mansoor Malik supported by senior associate Asad Qayyum. Clifford Chance acted as international counsel to the Government and issuer.

Rising crude oil prices and increased government investment in non-oil sectors will boost growth in Oman’s construction sector in 2018 by 10.4% and in 2019 by 11.5% outstripping the MENA construction sector average according to a recent report by BMI Research, a unit of Fitch Ratings.

An earlier report by intelligence provider BNC in April 2018, identified a total of 2,410 active construction projects in Oman with a combined value in excess of US$190bn. Ongoing projects comprise 1,840 projects worth US$61bn urban construction projects, 70 projects worth US$39bn in the oil and gas sector and 150 projects worth US$32bn in transportation.

BMI predicts continued strong growth for the sector over the course of the next five years. The upward trajectory is underpinned by Oman’s favourable foreign investment regulations and incentives, as well as an ambitious economic diversification agenda and robust government support for infrastructure sectors like power and water, tourism, and transport and logistics and the establishment of special economic zones to serve as an investment focus for companies seeking infrastructure opportunities.

Against this substantial project pipeline, AMJ’s construction specialists, managing partner, Mansoor Malik, and senior associate, Henry Mitchell, have contributed an overview of Oman’s construction law regime to the latest Legal 500 Construction Comparative Guide. For guidance on the procurement, financing, permitting and licensing of construction activity in Oman as well as standard contract terms relating to the obligations of parties, taking of security, termination and dispute resolution,

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Developing a robust debt capital market to sustain long-term economic growth has been high on Oman’s policy agenda for some years. This policy is beginning to pay dividends with the value of the bonds and sukuk segment of the Muscat Securities Market (MSM) growing by 32% to OMR2.63 billion during the period 2016 to 2017. This represents about 15% of the MSM’s total market capitalisation and an average annual increase of 46% over the last five years.

In a keynote address to the Oman Debt Capital Market Conference held in Muscat on April 18, the head of Oman’s Capital Market Authority (CMA), Sheikh Abdullah Al Salmi, attributed the strong growth to CMA measures to promote debt capital market instruments as an alternative funding mechanism for both government and private sector in addition to stimulating FDI. CMA measures include focusing on key areas of market infrastructure, regulation and product innovation in both the conventional and Islamic segments.

The day-long conference organised by the Gulf Bond and Sukuk Association (GBSA) in partnership with Al Busaidy Mansoor Jamal & Co (AMJ), and Maisarah, Bank Dhofar’s Islamic banking window, assembled industry players, legal experts and stakeholders to discuss the development of both conventional and Islamic debt markets. A panel moderated by AMJ’s Islamic finance specialist, Asad Qayyum, identified the introduction of more diverse and complex instruments and structured products as a key factor to driving development and promoting financial stability.

As at June 2018, the value of bonds and sukuks on the MSM has risen to OMR2.85 billion.

AMJ’s Islamic Finance team advised on two of the winning deals in the IFN Awards Deals of the Year 2017 ceremony held at the Ritz Carlton in Dubai on March 11.

The annual IFN Awards, now in the 12th edition, recognise excellence and innovation in the global Islamic Finance industry.

The Oman Deal of the Year was awarded to Oman Government for its US$2 billion 144A Sovereign Sukuk and the Ijarah Deal of the Year was awarded to Mazoon Electricity Company for its US$500 million 144A/Reg S Sukuk.

The winning deals were selected from a total of 425 nominations from across the world.

AMJ advised the Government of Oman and the issuer, Oman Sovereign Sukuk Company, on the Omani law aspects of the Oman Deal of the Year, the Sultanate’s maiden international public sukuk issuance in June 2017. The issuance was the debut issuance under the Sultanate’s first-ever trust certificates issuance program on which AMJ also advised. The deal is further noteworthy for being the second-largest US dollar Sukuk issued out of the GCC since July 2012.

On the Ijarah Deal of the Year awarded to Mazoon Electricity Company, AMJ acted as Oman Counsel for the joint lead managers and issuers. The US$500 million Reg S/144A Sukuk was the first international corporate sukuk issue out of Oman, and the first Reg S/144A corporate sukuk out of the MENA region since May 2016. The deal is also the first-ever Sukuk from the regulated electricity distribution sector which required detailed discussions with the regulator on structuring the transaction in order to comply with the restrictions of the Oman’s Sector Law.

The corporate deal also demonstrated the efficacy of Oman’s Sukuk law, which uses an SPV in lieu of a trust. The concept and structure were not deterrents to global and US investors who respectively took up 30% and 13% of the deal.The fact that both the award-winning deals were well-received by investors which should instil confidence in Omani institutions and corporates for the success of future transactions in the global market.

The IFN Deal of the Year 2017 awards, which were for the first time hosted as a part of IFN’s World Leaders Summit, assembled CEOs and decision-makers from Islamic financial institutions, top business leaders, policymakers, legal experts, economists and thought leaders from key Shariah finance markets around the world.

Mansoor Malik led AMJ’s team supported by senior Islamic Finance associate Asad Qayyum. AMJ was previously awarded the IFN’s global Sovereign Deal of the Year award for its advisory role on Oman’s OMR250million inaugural sovereign sukuk issuance in 2015.

AMJ partnered the Islamic Finance News in staging a successful third Oman Forum at the Grand Millennium, Muscat on March 13. The day-long annual event attracted a record number of industry players, regulators and legal experts gathered to deliberate the future of Islamic retail banking, capital markets and takaful in Oman. In his keynote address to an audience of more than 200 bankers, issuers and other key stakeholders from across the Middle East, Europe and Asia, new Central Bank of Oman chief, Tahir Salim Al Amri, noted that while Islamic banking in Oman accounted for OMR 3.03bn (12.9 per cent) of total banking assets at the end of 2017, the impressive growth trajectory of the segment shows signs of tapering. He urged Islamic banks and windows to focus on innovation and the introduction of new sharia-compliant financial products and services that are not clones of conventional banking offerings. This recurrent theme had been highlighted by AMJ’s managing partner, Mansoor Jamal Malik  in the 2017 Forum when he called for alternative investment products to maintain growth and create a vibrant and sustainable market.

During the course of the day, a high-level line-up of speakers participated in a series of panel discussions, case studies and presentations, on the opportunities and challenges in the Islamic market for both capital-raising and investment. Senior associate, Asad Qayyum , participated in a panel session of experts discussing the sharia-compliant project finance structures and future of Oman’s Islamic capital markets.

AMJ acted as Oman counsel to the issue manager and joint lead manager on the debut sukuk offering by Mazoon Electricity Company S.A.O.C. The landmark transaction marks the first international corporate sukuk issue out of Oman, and the first Reg S/144A corporate sukuk out of the MENA region since May 2016.

The ten-year Reg-S/144A sukuk certificates were successfully priced on 1 November 2017 and the profit rate for the certificates was set at 5.2 per cent.

The sukuk offering was based on the Shariah-compliant ijarah structure and the certificates were rated Baa2 (negative) by Moody’s Investor Services and BBB(negative) by Fitch Ratings.

Robust investor demand translated into a final order-book of approximately US$5bn from 300 orders, representing more than ten times oversubscription. The sukuk certificates were listed on the Irish Stock Exchange. The issuance was managed by Mazoon Electricity Company and Nama Holding along with JP Morgan Securities plc, Bank Muscat, KFH Capital Investment and First Abu Dhabi Bank acting as joint lead managers and Noor Bank and Warba Bank acting as co-managers.

The fundraising programme is expected to support the Mazoon Electricity group’s electricity transmission and distribution networks investments in Oman.

Mansoor Malik led AMJ’s team which included senior Islamic Finance associate Asad Qayyum. AMJ’s dedicated Islamic Finance team, the only one of its kind in Oman, has acted on a number of sukuk issuances in Oman in recent years including the Oman government’s US$2 billion international sukuk in 2017, US$500 million international sukuk in 2016 and the global award-winning US$650 million maiden sovereign sukuk in 2015.

Oman’s Capital Market Authority (CMA) has published new rules for the marketing of insurance and takaful products in Oman (Decision E/69/2017). These replace the previous rules issued in 1983.

The new rules introduce a raft of additional requirements including:
– obliging insurers to complete CMA-issued application forms;
– expanding the documentation that an insurer needs to furnish in support of its application for product approval including: policy documents in Arabic, or Arabic translations (which are deemed to override their English counterparts); the insurer’s pricing policy for the product (which must be consistent with the insurer’s board approved underwriting and pricing policy); and marketing materials for the policy;
– recognition of fairness standards, which oblige insurers to ensure that policy documentation is balanced and fair;
– introduction of a time-bound application process (30 days in which to complete the application process from initial filing) and response process (30 days from filing of a complete application for the CMA to respond); and
– levying fees which insurance companies are required to pay the CMA for scrutiny of the product application (OMR 100) and for marketing it in Oman (OMR 500).

While overall the new rules bring structure to the previous practice-driven approach to obtaining CMA approval for marketing new products, insurers are likely to need further guidance on matters not specifically addressed by them. These include the procedure to be followed upon a refusal or deemed refusal of an application by the CMA, or the impact on insured parties and reinsurers of the cancellation by the CMA of consent for marketing a product.

For more on Oman’s insurance law, contact Ardeshir Patel.

AMJ has advised the Government of Oman and the issuer, Oman Sovereign Sukuk Company, on the Omani law aspects of establishing an unlimited sukuk alijarah trust certificate issuance programme, and the debut US$2bn international sukuk issuance under the Programme. The Programme was listed on the Irish Stock Exchange in mid-May and followed by the US$2bn sovereign issuance which settled on June 1.

The sukuk facility, which has a seven-year tenor and profit rate of 4.397 percent, was effected under Rule 144A and Regulation S and listed on the Irish Stock Exchange.

The final order book was reportedly in excess of US$6.9 billion, more than three times the issue size, which demonstrates strong international demand for Oman’s high-yielding debt despite the country’s recent credit downgrade by Standard and Poor.

The transaction marks a number of firsts; the Programme is the first of its kind established by the Government; the sukuk issuance is Oman’s largest-ever; and the Sovereign’s first public offer of sukuk in the international market. The issuance marks Oman’s second foray into the international debt capital markets this year following a US$5 billion multi-tranche conventional bond sale in March upon which AMJ also advised. The funds raised by the two issuances are expected to meet a significant portion of the Sultanate’s requirements for 2017.

Mansoor Malik, managing partner, supported by senior Islamic Finance associate Asad Qayyum acted as Oman counsel to the Government and the issuer. Clifford Chance acted as international counsel. Alizz Islamic Bank, Citi, Dubai Islamic Bank, Gulf International Bank, HSBC, JP Morgan and Standard Chartered Bank were the sukuk book-runners.

In mid-2016, AMJ acted as sole counsel to the government on the Sultanate’s first international US$500 million sukuk issuance, which was privately placed. In two earlier ‘first of a kind’ transactions, AMJ advised the issue manager and joint lead managers on Oman’s debut US$648 million sovereign sukuk in 2015 and on Oman’s first-ever corporate issuance in 2013.

AMJ partnered the Islamic Finance News in staging a successful second Oman Forum and Dialogue at the Grand Millennium, Muscat on March 7. The day-long event gathered over 150 industry players, legal experts and stakeholders from across the Middle East, Europe and Asia in an audience with the regulators to discuss trends in Oman’s fast-growing Islamic finance industry.

In the opening keynote address H.E Abdullah Salim Al-Salmi, executive president of the Capital Market Authority (CMA) announced that two private sector sukuk programmes totalling OMR 300million (US$ 780million), have received initial approval from the CMA. These sukuk programmes are the ‘first of a kind’ under Oman’s new sukuk regulation and come as the government is contemplating a second international sovereign issuance.

In a second keynote, H.E Hamoud Sangour Al Zadjali, the executive president of the Central Bank of Oman (CBO) expressed satisfaction with the pace of development in the Islamic finance segment. In the short span of four years, the combined assets of Oman’s Islamic banks and windows had reached OMR 3billion, representing a 10% market share, by the end of December 2016.

AMJ’s managing partner, Mansoor Malik, shared his insights on Islamic finance regulatory frameworks in two expert panel sessions. He stressed the need for the industry and regulators to embrace alternative investment products in order to maintain the positive growth trajectory of the Shariah compliant segment and create a vibrant and sustainable market. Malik recently advised on the Sultanate’s international US$500 million sukuk, which was privately placed and settled on 14 July 2016, as well as the sovereign’s debut sukuk and preceding corporate sukuk, the first of its kind in Oman.

AMJ’s banking partner, Marcus Pery, participated in the Forum’s closed-door dialogue on developing Oman’s Islamic financial markets, between industry experts and CMA and CBO representatives. Senior associate, Asad Qayyum delivered a workshop to students on legal and regulatory issues in Islamic finance.

For more information, contact Bernadette Bhacker-Millard

AMJ is partnering with the IFN for this major event in the Islamic finance sector calendar in Muscat on March 7, 2017.

With keynote addresses by H.E Abdullah Al-Salmi, Executive President of the Capital Market Authority and H.E Hamood bin Sangour Al Zadjali, Executive President of the Central Bank of Oman, the Forum will provide an opportunity for industry players to gain insight into Oman’s Shariah-compliant capital raising and investment space as well as to network with other executives and leaders from government, industry and institutions.

This 2017 Forum builds on the success of the inaugural seminar last year which brought together more than 120 senior industry players from across the GCC with 26 domestic and international speakers. It will include an audience with the regulators and expert panel discussions on legislative and regulatory developments in the Islamic finance space as well as the outlook and prospects for Oman’s fast fund management industry, more sukuk issuances and cross border deals

For more information, contact Bernadette Bhacker-Millard

AMJ acted as sole Omani Counsel to all the parties on the Oman government’s recent US$500mn sukuk issuance. The sovereign sukuk issuance, Oman’s first US dollar-denominated sukuk issuance, was privately placed by Oman Sovereign Sukuk S.A.O.C, a special purpose vehicle incorporated in Oman and wholly owned by the Government of Oman.

The certificates were priced with a profit rate of 3.5% per annum, payable semi-annually. As in the case of Oman’s debut sovereign sukuk, the certificates are based on an al-Ijarah structure. The tenor is 6 years with maturity date of July 14, 2022.

Standard Chartered Bank acted as lead manager and placement agent for the issuance and Deutsche Bank as the certificate-holders’ agent and principal paying agent.

The purpose of this sophomore issuance is to finance ongoing development projects as well as to raise Oman’s profile in international debt markets. The issuance met with strong demand from investors despite a Baa1 rating by Moody’s compared to its A1 rating for the previous sovereign issuance.

Commenting on the deal, AMJ managing partner, Mansoor Malik, said, “It is a testament to investor confidence in Oman’s stable outlook and the government’s risk profile that, despite the rating downgrade, this international issuance achieved the same pricing as the previous sovereign issuance. We are pleased to have played our part in another landmark transaction in Oman’s Islamic finance space and to assist efforts to maintain forward momentum in the economy during challenging times.”

Mansoor Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior Islamic Finance associate Asad Qayyum. The same team acted as Oman Counsel to the issue manager and joint lead managers on Oman’s debut sovereign transaction in 2015.

Allen and Overy acted as International Counsel for Standard Chartered Bank and Clifford Chance as International Counsel for Oman Sovereign Sukuk S.A.O.C and the Government.

A detailed regulation governing the issue and management of sukuk transactions came into force on April 11, 2016. Issued by the Capital Market Authority (CMA), the body authorised to regulate sukuk by an earlier amendment to the Capital Market Law (Royal Decree 59/2014), this is the latest development in Oman’s evolving Islamic regulatory landscape. Investor protections and procedural clarity introduced by the new rules are forecast to spur sukuk issuances particularly among private sector corporates seeking to diversify their financing bases and risk.

The new regulation codifies the trust structure to be adopted for an issuance and the powers and duties of the trustee to manage and invest the trust property and allows the issuance of a sukuk programme. It details the procedure for applying to the CMA for the issuance approval and grant of a licence to establish a special purpose vehicle in the form of a limited liability company or any other dedicated legal entity. The choice of shariah supervisory board (SSB) tasked to ensure that the issuance is shariah-compliant, is left to the issuer. Sukuks may be denominated in omani rials or a foreign currency. There is no restriction on the amount of the sukuk based on the beneficiary’s capital. The CMA has the option to require the issue to be credit rated.

The new regulation will provide a much-needed liquidity management tool and investment avenue base for both conventional and shariah-compliant investors. As a late entrant to the Islamic finance segment, Oman has benefited from the experience and best practice in other jurisdictions and this latest legislative move is no exception. The detailed and transparent nature of the regulation is expected to provide additional comfort to investors and give Oman an edge over regional sukuk markets which lack dedicated sukuk regulations and which, instead, issue sukuk by reference to conventional bond regulatory frameworks with shariah-compliant add-ons. According to Kemal Rizadi Arbi, an adviser at the CMA, “We are confident that this new regulation will have a positive impact on Oman’s capital market and the economy”.

Since this landmark development, approval has been granted for a major corporate to issue a US$150 million sukuk by way of private placement and interest among Oman companies to tap into capital market financing is rapidly rising. For more information on sukuk and other Islamic finance instruments, contact Mansoor Jamal Malik or Asad Qayyum.

AMJ partnered the Islamic Finance News, a leading online industry journal, in organising the inaugural IFN Oman Seminar and Dialogue 2016 in Muscat earlier this year. The event brought together around 170 industry leaders, banks, investors, issuers, legal experts and other key stakeholders in the Islamic finance industry in Oman and the UAE to discuss the future of Islamic Finance in Oman and its role in diversifying the economy of the country.

Strongly supported by the regulators, the seminar opened with a keynote address from Hamoud Sangour Al Zadjali, the executive president of the Central Bank of Oman (CBO), in which he highlighted the successes of Oman’s Islamic financial institutions in achieving, within a short span of three years, OMR2.25 billion (USD582.25 billion) in gross assets and a market share of 7.75 per cent as of December 2015. Overall, Islamic banks and window operations are expected to ramp up market share to 10 per cent of the banking industry by 2018.

Featuring a series of panel discussions, case studies and presentations, the event highlighted the opportunities available in the fast-growing Omani Islamic market for both capital-raising and investment. AMJ’s managing partner, Mansoor Jamal Malik took part in a panel discussion on recent developments shaping Oman’s Islamic Capital Markets in which he summarised the current regulatory and legal framework for structuring Shariah-compliant transactions. Senior associate, Asad Qayyum, participated in a closed afternoon session of experts to discuss a roadmap for the further expansion and development of industry in Oman.

AMJ has also entered into an exclusive media partnership with the IFN’s Islamic Finance Corporate, a new monthly e-newsletter dedicated to promoting Oman’s Islamic Finance.

For more information, contact Bernadette Bhacker-Millard

Oman’s Takaful Insurance Law,approved by Oman’s State Council (upper house) in February 2015, finally came into force on March 6, 2016 (Royal Decree 11/2016). The law is based on the AAOIFI guidelines and provides a robust and comprehensive framework covering all aspects of the shariah-compliant insurance sector. According to Oman’s insurance regulator, the Capital Market Authority (CMA), takaful insurance premiums in Oman totalled OMR39 million (US$101 million), representing a market share of 8.7% of the insurance sector as a whole in 2015.

The new law regulates all aspects of a takaful operator’s activities including oversight and reporting requirements, product standards and liquidity levels. It requires takaful insurers to be publicly listed on the Muscat Securities Market (MSM) with a minimum capital of OMR10 million. This aligns with regulations introduced in August 2014 doubling minimum capital requirements for conventional insurers from OMR5m to OMR 10m and requiring all insurers to list on the MSM by 2017.

Under the law the conduct of takaful insurance business is restricted to dedicated takaful companies. This prevents conventional underwriters from setting up Islamic insurance windows (in contrast with the Islamic banking sector where the regulations allow non-Islamic banks to own and operate Islamic ‘windows’). These combined capital-centred and market regulatory provisions aim to create a level playing field for Oman’s fledgling takaful industry which, like in other GCC markets, faces the challenge of an established and fiercely-competitive conventional insurance industry.

The CMA has extensive powers including to licence, control and oversee takaful operators. Takaful operator licences will be granted for renewable periods of five-years provided the regulator deems the issue of a licence in the economic interests of the country. The CMA may suspend issuance of new licences at any time if it is of the opinion that the market is saturated and may, at any tim, withdraw a licence for breach of a condition. The CMA also has powers to intervene in the management of a takaful insurer in certain circumstances, by conducting administrative investigations, requiring the company actuary or another actuary to report on the financial standing of the company, appointing an non-voting auditor to the board or dissolving the board and appointing a committee to run the company until a new board is constituted.

The law imposes obligations on the takaful operators to constitute a Shariah committee with a minimum of three members including Fiqh specialists in financial transactions and a takaful expert. Other provisions govern the maintenance of solvency margins, fund set-up and management and the transfer of takaful business from one company to another.

This latest regulatory development in the sector is expected to raise awareness and fuel consumer appetite for takaful insurance as well as other faith-based products and services. Industry analysts predict significant growth potential for takaful insurance in Oman due to the low current rate of insurance penetration (1.1%). The global takaful market led by Saudi Arabia and GCC (63%) and Malaysia and Indonesia (30%) has maintained double-digit growth since 2011 and is forecast to be worth $20bn by 2017.

Even prior to its enactment, investor response to two takaful insurer IPOs at the end of 2013 indicate a strong appetite for Shariah compliant insurance products. AMJ advised on these successful deals, one a conversion of Al Madina Insurance into Al Madina Takaful, and the other, Takaful Oman, a new company backed by investors including Kuwait’s T’azur Takaful. Both of these ‘first of a kind’ IPOs were heavily subscribed.

AMJ has won an international award for its advisory role on Oman’s OMR250million inaugural sovereign sukuk issuance.

The firm received the prestigious global Sovereign Deal of the Year 2015 award from the industry leading Islamic Finance News (IFN) at its annual Deals of the Year Awards ceremony in Dubai on February 28.

The Awards recognise those who have participated in the industry’s most groundbreaking transactions each year. The sovereign issuance also won an honourable mention in the top global ijarah and sukuk categories.

Commenting on the award, managing partner, Mansoor Jamal Malik said, “We are delighted that Oman’s first-ever sovereign sukuk issuance has been recognised as the standout sovereign deal of the year in the global Islamic finance space. We are pleased to have contributed to a successful debut offering which is expected not only to boost Oman’s emergent Islamic finance industry but also to strengthen the capital markets and to support the government’s economic diversification drive.”

Although the last of GCC states to embrace Islamic finance, Oman has over the last three years built a strong Shariah compliant banking and finance industry. Today the sector comprises two fully-fledged Islamic banks and six Shariah compliant banking windows, as well as two takaful operators and a several Shariah compliant investment funds. Islamic banking assets accounted for 7.4% of the total banking sector at the end of 2015 and are forecast to reach 10-12% within the next two years.

Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior associate, Asad Qayyum.

For more information, contact Bernadette Bhacker-Millard

AMJ acted as Oman Counsel to Bank Muscat as issue manager and joint lead manager with Standard Chartered Bank on the first-ever sukuk offering by the Omani Government. The OMR200 million (US$517.17 million), 5-year benchmark sovereign sukuk issuance was oversubscribed close to 1.7 times, attracting 22 orders totalling OMR336 million (US$869.75 million) from a wide base of both conventional and Islamic institutions during the subscription period, which ran from Oct. 8 to 22.

The Ministry of Finance expanded the program by 25% to OMR250 million (US$647.13 million) at a yearly 3.5% cut-off yield to accommodate the strong order book. Results of the sale and allocations are awaited.

AMJ’s role included advising Bank Muscat and Standard Chartered on the listing, regulatory and settlement mechanics of the sukuk issue under Omani law as well as on Omani law aspects of the transaction structuring and documentation. Since this was a debut sovereign issue and as the draft sukuk regulations circulated by the Capital Market Authority are not yet in final form the transaction raised a number of novel issues, both substantive and procedural. The issuance also set the record for being the first debt capital market instrument – Islamic and conventional – to be priced through a book-building process with a uniform price auction.

Commenting on the deal, AMJ managing partner, Mansoor Malik, said: “We are pleased to have been involved on this ground-breaking, sukuk issuance which involved a number ‘firsts’ and a steep learning curve for all stakeholders. As such, it establishes a useful benchmark and precedent which we expect to spur future issuances, both by government and private sector.”

The issuance which is rated A1 by Moody’s Investors Service, in line with the Sultanate’s long-term issue rating, is seen as a key development for Oman’s capital markets, broadening Shari’a compliant investment avenues for private and public players, allowing them to diversify their financing base and spread risk.

Mansoor Malik led AMJ’s team which included corporate and capital markets partner, Ardeshir Patel, and senior Islamic Finance associate Asad Qayyum. Allen and Overy acted as international Counsel on the transaction.

The State Council (Oman’s upper house) approved a draft law for Oman’s shariah-compliant insurance (takaful) market in mid-February.  The takaful law is one of a series introduced to regulate the country’s nascent Islamic banking and finance sector. The draft prepared by the insurance regulator, the Capital Market Authority, was reportedly amended after deliberation by the State Council and the Majlis Ash’shura (Oman’s lower house).  Once enacted by royal decree, the law is expected to spur confidence and growth in Oman’s emerging takaful market.

The law will regulate all aspects of a takaful operator’s activities including oversight and reporting requirements, product standards and liquidity levels. It requires takaful insurers to be publicly listed on the Muscat Securities Market (MSM) with a minimum capital of OMR10 million. This aligns with regulations introduced in August last year doubling minimum capital requirements for conventional insurers from OMR5m to OMR 10m and requiring all insurers to list on the MSM within 3 years. Crucially, the new law restricts the conduct of takaful insurance business to dedicated takaful companies. This will prevent conventional underwriters from setting up Islamic insurance windows (in contrast with the Islamic banking sector where the regulations allow non-Islamic banks to own and operate Islamic ‘windows’).

These combined capital-centred and market regulatory provisions aim to create a level playing field for Oman’s fledgling takaful industry which, like in other GCC markets, faces the challenge of an established and fiercely-competitive conventional insurance industry.  According to Moody’s rating agency these types of measures are effective to improve overall underwriting quality and are likely to lead to consolidation among smaller market players in a crowded market.

Industry analysts predict significant growth potential for takaful insurance in Oman due to the low current rate of insurance penetration (1.1%). The global takaful market led by Saudi Arabia and GCC (63%) and Malaysia and Indonesia (30%) has maintained double-digit growth since 2011 and is forecast to be worth $20bn by 2017.  Investor response to two takaful insurer IPOs at the end of 2013 indicate a strong appetite for takaful.  These successful IPOs, one a conversion of Al Madina Insurance into Al Madina Takaful, and the other, Takaful Oman, a new company backed by investors including Kuwait’s T’azur Takaful, were heavily over-subscribed. Both IPOs were handled by AMJ’s Corporate and Capital Market’s team.

Increased activity in the Islamic banking and finance sector overall is likely to raise awareness and fuel consumer appetite takaful insurance as well as other faith-based products and services. A main market driver in 2015 will be the issuance of several sukuk or Islamic bond offerings.  These include the long-awaited sovereign sukuk offering by the government of Oman and several banking sukuks.  The sukuks issuances will help to diversify the limited range of investment options currently available to the shariah-compliant sector within Oman and to soak up the excess liquidity.

The shariah-compliant index (SCI) launched by the MSM in mid-2013 to enable investors to identify suitable investable assets will come more to the fore  as an increasing number of shariah-compliant products and services come online in the coming years.  A the end of 2014, it  included more than 30 listed financial, industrial and services companies that comply with the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) requirements for Islamic investment principles.

Royal Decree 59/2014, which came into force on November 11, has introduced important amendments to Oman’s Capital Market Law (CML).

These include changes in applicable law concerning acquisitions of significant stakes (25% and above) in public joint stock companies. The changes expand the information that a prospective acquirer needs to provide the Capital Market Authority (CMA) in its application for the CMA’s consent to the acquisition and introduce additional obligations that the prospective acquirer needs to fulfill in relation to the acquisition.

Other amendments are:-

• changes to the protocol for constituting the board of directors of the Muscat Securities Market;
• inclusion of new provisions in the CML which deal with the issuance, listing and trading of Sukuk;
• empowering brokers to sell securities purchased on behalf of a client, which are not paid for (i.e. there is a client default) instead of merely allowing a freeze on dealing with such securities as was the case previously;
• augmenting the powers of the CMA to investigate offences and sanction offenders.

For more on the implications of the changes or any aspect of Oman’s capital markets law, contact Mansoor Malik or Ardeshir Patel.

Al Madina Investment recently organised an event to celebrate the issue of the first sukuk in Oman. At the event which was attended by Sheikh Abdullah Salim Al Salmi, the executive president of the Capital Market Authority, AMJ received an award for its role advising Al Madina on the Oman law aspects of this ‘first of its kind’ deal.

Al Madina acted as the principal advisor, joint lead arranger and joint lead manager for the 50 million rial ($130 million) sukuk issue by Omani real estate developer, Tilal Development Company. The proceeds of the sukuk issue will be used to finance the expansion of Tilal’s flagship mixed-use development comprising residential and retail units as well as the Muscat Grand Mall shopping complex.

The sukuk issue is seen as an important landmark in the development of the nascent Islamic finance industry in Oman and one which paves the way both for further corporate sukuk issues as well as a soveriegn sukuk mooted for 2014.

AMJ advised on the Omani law aspects of a 50 million rial ($130 million) sukuk (Islamic debt capital market instruments) the first of its kind in Oman arranged by Al Madina Investment SAOG for Omani real estate developer Tilal Development Co SAOC.

The five-year sukuk, offering a profit rate of 5 percent and based on an ijara structure, a leasing arrangement commonly used in other Islamic markets, was privately placed with investors. Tilal, 40 percent-owned by sovereign wealth fund Qatar Investment Authority, will use proceeds from its sukuk to expand the Tilal Complex in Muscat which includes the Muscat Grand Mall as well as residential and office space. This pioneering corporate sukuk issue involved complex issues arising from the absence of a sukuk regulatory framework in Oman.

It comes as the Central Bank of Oman executive president, Hamoud Al Zadjali announced the formation of a panel to look into issuing a sovereign sukuk in the coming year.

AMJ’s Anthony Watson was a guest speaker at a tax seminar organised by the Muscat American Business Council on April 17.

A joint presentation by Anthony, a senior associate in AMJ’s commercial law practice, and Philip Bond of KPMG, highlighted key corporate tax law issues such as withholding tax, exemptions, foreign capital investment rules and the Oman-US Free Trade Agreement for an audience of experts and businessmen.

A hot topic on the sidelines of the seminar was the need to amend the Oman tax laws to reflect new Islamic banking requirements. Oman’s Islamic banks, Bank Nizwa and Izz Bank as well as the Islamic banking windows introduced by many other banks, are pressing for Sharia-compliant protocols to govern the tax returns they are required to file by the end of 2013. Also of interest to the business community is the introduction of value-add tax ‘VAT’ in the GCC tentatively slated for 2015-6.