Monday 27th Sep 2021
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T-Bill and Bonds

Govt to Issue USD 1 Billion Sukuk Backed by Dharumavantha Hospital

The government of Maldives has hired four international banks to arrange a five-year U.S dollar-denominated Sukuk.
The banks hired by the government of Maldives are Credit Suisse, Emirates NBD Capital, HSCB, and the Islamic Corporation for the Development of the Private Sector (ICD). The banks started fixed income investor calls on Monday according to multiple sources.
The government intends to raise $ 1 billion through the Sukuk. Earlier this week, Moody's Investors Service assigned a B3 credit rating for the planned Sukuk issuance. Proceeds from the Sukuk are to be used to finance development projects in the Maldives and to repurchase the $250 million sovereign bond which matures in June 2022.
The government of Maldives has incorporated a special purpose vehicle (SPV) in the Cayman Islands, under the name Maldives Sukuk Issuance Limited to carry out the Sukuk transaction. To issue the Sukuk, an asset valued over 51 percent of the Sukuk will be needed to be transferred to the SPV. The government is using Dharumavantha Hospital as this asset.
The SPV will then lease Dharumavantha Hospital to the government and the government will make regular lease payments to the SPV. Proceeds from the lease payments will go to the Sukuk holders. It will be considered as profit to the Sukuk holders. Once the Sukuk matures, the government will finance the re-purchasing of Dharumavantha Hospital. The government will lose control of the hospital if they fail to make timely payments to the Sukuk holders.
It should be noted that while in the opposition, President Ibrahim Solih criticized the Dharumavantha Hospital development project and described the hospital as a "cave".
A Sukuk is an Islamic financial instrument that is similar to a bond. However, it complies with Islamic shariah. Since interest is not permissible in Islam, the issuer of a Sukuk sells an investor group a certificate, and then used the proceeds to purchase an asset that the investor group has a direct partial ownership interest in.
The government of Maldives tried to issue Samurai bonds to Japan in 2020. However, due to the low sovereign credit rating of the Maldives, the government failed to issue the bonds last year.