BarCap sees 35 pct dlr sukuk issue growth in '08

By Olesya Dmitracova

LONDON (Reuters) - Tight cash in global markets will put a lid on the stratospheric rise in dollar issuance of Islamic bonds this year, but will not stop its growth, the head of Islamic finance at Barclays Capital said on Monday.

"This year we will get 30 to 35 percent growth rather than the breakneck 100 percent growth that we've had over the last two to three years," Arul Kandasamy from the investment bank of Britain's Barclays Plc (BARC.L: Quote, Profile, Research, Stock Buzz) told the Reuters Islamic Banking and Finance Summit in London.

Of the approximately $30 billion worth of bonds compatible with Islamic law, or sukuk, issued last year, around $10 billion were in U.S. dollars, he said. Barclays Capital was the No. 1 bookrunner for dollar sukuk issuance both in 2006 and 2007.

"The size of those deals that we and other banks have been doing have been so large that by necessity you have to tap the international investor base," Kandasamy said.

Since liquidity became hard to come by, credit spreads have widened, putting off some borrowers in the Middle East. At the same time, some investors are holding on to their money due to concerns about what other problems markets may throw up or because they want an even higher yield.

But confidence in the Middle East remains strong.

"We are getting positive vibes from international investors about Middle Eastern credit, such as Tamweel, a UAE mortgage lender, while mortgage providers globally are being hammered."

BarCap arranged a $300 million convertible sukuk for Tamweel PJSC TAML.DU in December despite the mood among investors nearing rock bottom after half a year of market turmoil.  Continued...