A government Islamic lease (Sukuk Al Ijara) issue floated to raise BD200 million ($530 million) is open to direct subscription by retail investors, the Bahrain Bourse (BHB) announced.

Both Bahraini and non-Bahraini investors can subscribe to the issue through registered brokers at BHB, said a report in the Gulf Daily News (GDN), our sister publication.

Each sukuk has a par value of BD1 and the minimum subscription is 500 sukuk (BD500).

The securities have a tenure of 10 years with July 9 as the issue date and July 9, 2025 as the maturity date.

Subscribers investing BD10,000 and higher can expect a minimum allotment of 10,000 sukuk, while the remaining quantity will be allocated on a pro-rata basis, the BHB said.

The subscription ends on Tuesday, and investors will be able to trade the sukuk in the secondary market at BHB post listing, expected to be on July 26.

The expected annual return (rent) on the securities is five per cent, to be paid every six months on January 9 and July 9 every year till maturity.

The first return payment will be on January 9 and the last one on July 9.

Sukuk Al Ijara are instruments representing assets owned by the government, in this case land in Hawrat Unqah.

The securities are issued by the Central Bank of Bahrain on behalf of the government for creating new opportunities for investment of surplus financial resources in the economy and to provide a method of financing the expenditure and needs of various development projects.

In issuing these securities, the government sells an asset to the investors who rent it back to the government at a predetermined rental rate, via a rental contract.

The government also issues a binding promise to buy-back the asset at its par value at the end of the rental period, which means that the securities are directly guaranteed by the government.

It also guarantees continuation of the lease according to the contract.

This is the second open issue of Sukuk Al Ijara through Bahrain Bourse, following the success of the maiden issue earlier this year, which was oversubscribed.

For the previous issue, the BHB had proposed that the applicable commission of subscribing and trading of sukuk be set at 0.0008 (0.08 per cent) of each transaction, and that it would remain negotiable between the broker and the investor. - TradeArabia News Service