The Kuwait Turkish Participation Bank (KTPB) issue is the first ever sukuk out of Turkey. The $100m debut sukuk was issued mainly to fund KTPB’s future expansion plan and general corporate purposes. The transaction attracted a large amount of liquidity across the GCC, Europe, and Asia regions, resulting in the book being oversubscribed 1.5 times.
KTPB (or Kuveyt Turk Katilim Bankasi, in Turkish) is a fully fledged commercial bank which has operated primarily in the Republic of Turkey since 1989. It undertakes all its business in compliance with the principles of interest-free banking, a central tenet of Islamic finance and a practice known as ‘participation banking’ in Turkey. As a result of this, and following the introduction of a new banking framework in 2005, Kuveyt Turk was reclassified as a participation bank and renamed to Kuveyt Turk Katilim Bankasi A.S.
Today the bank is 62 percent owned by Kuwait Finance House. It offers interest free banking, primarily to corporates and SMEs, but also targets retail banking segments such as mortgage related businesses – although these amount to less than 20 percent of the loan portfolio.
KTPB ranks third among the four participation banks in Turkey by deposits, with a 22 percent market share, and ranks 19th largest by unconsolidated assets of the 49 banks in Turkey. The bank has 156 branches throughout the country.
Structure overview
The issue consists of three year fixed rate Sukuk Trust Certificates. The certificates are denominated in US dollars and offered under Regulation S. The offering is structured as a Wakala Sukuk on the basis of the transfer of the beneficial rights and interest in a portfolio, consisting of 51 percent ijarah receivables and 49 percent murabaha receivables. The issuer for KTPB’s inaugural sukuk is KT Turkey Sukuk Limited (Sukuk SPV), an exempted company with limited liability incorporated in the Cayman Islands. KTPB assumes the roles of the obligor, guarantor, managing agent and seller in the transaction. The certificates were cleared through Euroclear and Clearstream and are listed in the London Stock Exchange as a primary listing. KTPB conducted a non-deal roadshow in Dubai, Abu Dhabi, London and Bahrain in July 2010, which attracted favourable attention. The sukuk pays a semi-annual coupon of 5.25 percent and has been geographically distributed throughout the Middle East, Europe, and Asia.
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