GOVERNMENT OF SHARJAH IUES DEBUT 0-YEAR SUKUK

The Government of Sharjah has today announced the issuance of its debut transaction in the Debt Capital Markets, a US$ 750 million 10-year Sukuk Al Ijara priced at 3.764%. This is not only the Government of Sharjah's first issuance, but also the first time a sovereign has executed a 10-year Sukuk in its debut issuance.

Execution process and order book

Following investor meetings in Singapore, Malaysia, the UAE, Saudi Arabia and the UK, the Government communicated initial price thoughts to the market of low to mid 100 basis points over the 10-year mid-swap rate. Responding to overwhelming demand, the Government tightened the pricing to the 120bps area, before finally settling at 110bps, giving an eventual profit rate of 3.764%.

Extremely high and broad-based demand persisted, with the final order book swelling to US$ 7.85 billion from around 250 different investors within a day, representing an oversubscription of the eventual issuance of over 10 times.

While the investor base in the UAE and wider GCC was very strong, orders from international high-grade and emerging markets investors were also exceptionally high. Orders were well diversified from real-money investors, including central banks, fund managers, insurance companies and banks from a wide geographic spread across Asia, Europe, the Middle East and offshore US.

HSBC assisted the Government of Sharjah as global coordinator for the transaction, with KFH Investment, National Bank of Abu Dhabi, Sharjah Islamic Bank and Standard Chartered acting alongside them as Joint Lead Managers. Al Hilal Bank, Dubai Islamic Bank and Arab Banking Corporation were appointed as co-lead managers for the transaction.

A key step in Sharjah's development

For the Government of Sharjah, accessing the Debt Capital Markets through a debut sukuk issuance meets a number of important objectives. From a financial perspective, the transaction has helped the Government to diversify its investor base, access longer fixed-term tenors and optimise pricing. From a wider economic perspective, the issuance will provide a benchmark for any transactions undertaken by Sharjah entities in both the wider public sector and the private sector. It will also enhance the efforts of the UAE authorities to develop the local financial markets.

Finally, this transaction is an important and highly visible step forward in the Government of Sharjah's efforts to adopt international best practice in all its activities and to present the modern, outward-looking face of the emirate to a global audience.

A unique investment opportunity

The enormous demand for the Government of Sharjah sukuk reflects the strength of the Emirate's value proposition for investors.

With strong investment-grade credit ratings from Standard & Poor's ( A' Stable) and Moody's ( A3' Stable), Sharjah offers an extremely stable and low-risk option for investors looking to expand their portfolios. The long history of careful management of the public finances by the Government has ensured a very low level of Government debt and a high degree of fiscal flexibility. This gave investors the confidence to invest in a longer-term product, despite this being the Government of Sharjah's first foray into the public market.

Sharjah's economy also offers a unique potential for sustainable and resilient growth in future years.

One of the most diversified economies in the GCC, Sharjah has particular strength in manufacturing and industry, propelled by 19 industrial areas and the free zones at Hamriyah and Sharjah International Airport. The excellent transport and logistics infrastructure, with three thriving ports as well as an expanding passenger and cargo airport, enables future economic expansion.

The Government of Sharjah's top priority is to invest in human capital, through education and cultural experiences. HH Sheikh Dr. Sultan Bin Mohamed Al Qasimi, Ruler of Sharjah, strongly believes that education and culture are the key to long-term economic sustainability, social welfare and personal fulfilment. The jewel in the Emirate's crown is undoubtedly the University City area, which will be complemented by the opening of the new Al Qasimia University later in 2014. Sharjah's strength as a centre of traditional local culture, with over 20 museums, is being celebrated this year with the Emirate named as global Capital of Islamic Culture 2014, and in 2015 Sharjah has the honour of being Capital of Arab Tourism.

Quotes

Sheikh Mohamed Bin Saud Al Qasimi, Chairman of Sharjah Finance Department

This is a major landmark in the financial and economic development of the Emirate of Sharjah, reflecting many months of hard work. As a Finance Department, we have met all of our own objectives, but more importantly we have shown the best face of the Emirate to a global audience of investors and received a hugely positive response. This reflects the prudence and the wisdom that His Highness Sheikh Dr. Sultan Bin Mohamed Al Qasimi has demonstrated in developing Sharjah, and positions us strongly for the future.

Abdulfattah Sharaf, HSBC, CEO UAE

We are extremely proud to have acted as Ratings Advisor and Global Coordinator for the Government of Sharjahs first ever international Sukuk issuance.

It demonstrates the confidence investors have in the Emirate of Sharjah and the UAE in general. We are proud to have supported the Government in meeting its latest milestone and hope to work together with the Finance Department in its future endeavours.

Emad Al Monayea, CEO of KFH Investment

We are delighted at the clear success of the Government of Sharjah's debut Sukuk issuance. This shows the strength and the potential of the Emirate, and the confidence that investors from around the world have in the GCC region and Sharjah in particular. KFH Investment is

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