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Kuwait Finance has minimal exposure to Saad, Gosaibi

Posted on: June 12, 2009


Reuters – Tuesday, June 9

* Exposure “not even 0.1 pct” of credit portfolio

* Sukuk market building momentum after slump

KUALA LUMPUR, June 9 – Kuwait Finance House <KFIN.KW>, the country’s biggest Islamic lender, has minimal exposure to two troubled Saudi firms, a unit of the bank said on Tuesday.

“I tried to do some kind of calculation. It’s not even 0.1 percent of our total credit portfolio,” Emad Yousef Al-Monayea, Managing Director of Kuwait Finance’s subsidiary, Liquidity House, told reporters. “We used to have good exposure but we did reduce that.”

Saudi Arabia’s Saad Group said last week it would restructure its debt after it ran into unspecified difficulties, and the Saudi central bank froze the accounts of its billionaire chairman, Maan al-Sanea. [ID:nN0167288].

Saad’s woes have rattled a $30 billion empire built by al-Sanea, and represent one of the biggest defaults to hit the Gulf Arab region since the onset of the financial crisis.

In addition, Ahmad Hamad Al Gosaibi Group & Brothers is restructuring an unspecified amount of debt. Troubles at both firms have rocked investor confidence and raised questions about the regulation and transparency of Saudi Arabia’s opaque financial markets.

Al-Monayea said global sukuk issuance this year was expected to top 2008’s $14 billion but would not equal 2007, when issuance hit a record $46.7 billion, according to the Islamic Finance Information Service.

“I believe that the sukuk market is building its momentum, coming back but with more solid ground,” he said during a visit to the Malaysian capital.

He cited strong demand for Indonesia’s $650 million global Islamic bond in April and Bahrain’s upcoming issuance.

“Still there is no full recovery, the storm has not permanently settled. We wish that we do not be surprised with any kind of new issues.”

Sales of Islamic bonds have slumped worldwide due to the global economic and financial crisis, and corporates are looking to sovereign issues to help them gauge investors’ appetite.

The industry has been cautious about prospects for a recovery. Malaysia’s capital market regulator estimated in April that global sukuk issuance this year would be worth at least $10 billion. (Click on [ID:nISLAMIC] for more Islamic finance stories and <ISLAMIC> for a speed guide)

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