Al Rayan Bank planning £250mn mortgage-backed Islamic bonds

Birmingham-based Al Rayan Bank has mandated banks to raise £250mn ($352mn) via Islamic bonds, or sukuk, using a residential mortgage-backed securitisation, the Shariah-compliant lender has said. Al Rayan has appointed Standard Chartered and itself to arrange investor meetings ahead of what would be its debut sukuk and one of the first such transactions in Britain. The proposed sukuk from Al Rayan, owned by Qatar’s Masraf Al Rayan, would help fund its ongoing efforts to expand into commercial real estate, private banking and financing for small- and medium-sized businesses. Rating agency Moody’s has assigned a provisional Aaa rating to the sukuk, which would consist of a portfolio of first lien Home Purchase Plans secured by residential properties, with a current pool balance of approximately 300mn pounds. The sukuk would securitise contracts known as diminishing Musharakah with Ijara finance, akin to reducing co-ownership arrangements, secured by residential properties located in England and Wales. Al Rayan is among more than 20 firms in Britain that offer Shariah-compliant financial products, including lenders such as Gatehouse Bank and the Bank of London and the Middle East. Britain also plans to issue a sovereign sukuk in 2019 after it first tapped the market in 2014.