The Islamic Bank of Thailand has asked a group of banks to submit proposals for a baht-denominated sukuk by this Friday. However, the formal request for proposals (RFP) has come as a surprise because the deal has been in the works for the past few years and Malaysian bank CIMB has already been working on it.
“I’m not sure why they sent out an RFP. I’m not sure if CIMB has been formally appointed, but they’ve been working on it for a long time,” said one Bangkok-based banker.
Some speculate that Islamic Bank of Thailand wants to go through a formal selection process and that it may also be planning to add more banks to broaden the distribution of the bonds.
“I think the Islamic Bank of Thailand wants it to be a high-profile deal since it will be Thailand’s first sukuk, and so they might be looking to add more banks,” said another Bangkok-based banker.
The RFP was sent to some 10 banks, which are said to include local houses such as Siam Commercial Bank, Bangkok Bank and TMB Bank, as well as foreign banks such as HSBC, Standard Chartered and CIMB. Foreign banks with structuring expertise are expected to tie up with local banks that can distribute locally. The RFP did not include terms such as the size or tenor, but previous market chatter was that the bank would raise about Bt6 billion ($191 million).
Islamic Bank of Thailand’s sukuk has been slow to get off the ground, mostly due to tax reasons. Thailand, like many countries in Asia, wants to develop its Islamic financing capabilities, but has been lagging behind its peers.
A sukuk is seen to be harder to sell in Thailand, given that there is less of a natural investor base for Islamic products. In Asia, Malaysia continues to be a centre for Islamic financing, followed by Indonesia. Meanwhile, Singapore and Hong Kong have both been striving to compete for a slice of that business with less success.
The Islamic Bank of Thailand was set up as a state enterprise under the Ministry of Finance and the bank operates in accordance with Islamic rules on transactions. It has 26 branches in the country.