Singapore: Goldman Sachs has not forgotten its plan for a $2 billion Sukuk (Islamic bonds) program which it had put on the backburner several months ago and the plan had ignited a lot of debate among the Islamic Finance experts.
Postponing the plan by Goldman Sachs does not mean that the Islamic market has allowed the US bank's potential landmark issue to stray far from its thoughts.
After the Islamic Financial Services Board summit in Istanbul this week, there were rumors among the participants that Goldman still intends to proceed with a first tranche of the sukuk program. There were also reports that Goldman Sachs has made necessary structural changes to the deal and Gulf Cooperation Council (GCC) investors may no longer be specific targets of Goldman.
Singapore-based Chairman of South East Asia at Goldman Sachs, Brooks Entwistle, declined to comment on the bank's sukuk plans when asked about its status during a pre-summit panel discussion showcasing Malaysia. However, he said, "The underlying ethics of the Islamic market are very important to us."
According to Entwistle, Goldman sees Islamic finance as having reached a point where the market could make a big push forward. He said that a key objective for the industry is education of talent and Malaysia is leading the industry. Goldman has developed its Islamic finance presence by responding to client needs, he added.
The latest market speculation is about Goldman making structural changes to its prospective sukuk program tallies with previous talk in March that the bank was taking its time to address concerns about the deal before returning to the Islamic market.
According to the sources, Goldman had confirmed in mid-February that it was still interested in issuance of the sukuk. Since Goldman first registered the program with the Irish Stock Exchange back in October, there have been a series of controversies hitting the deal but the intensions of Goldman did not stumble.
There are so many critics on the deal including the prominent Abu Dhabi Islamic Bank's Shariah Board that queried Goldman's intended use of proceeds, its application of the murabaha (financing) structure and the issue of tradability due to the public listing.
When it was revealed earlier this year that three of the renowned scholars listed in the base prospectus as likely advisers had not given any indication that they would approve the deal, it also shocked the deal.
In December, Saudi Arabia-based Mohammed Khnifer, a sukuk structurer and strategist, published a report in which he questioned the structure of program, its use of proceeds and its listing on the Irish Stock Exchange.
Khnifer made his first public statement this week on the Goldman’s sukuk since publishing the report last year. He was invited by Saudi Arabia's non-profit Alfaisal University, founded by a consortium of Harvard, Cambridge and MIT, to address its College of Business as undergraduates undertook a case study on the structure of the Goldman deal.
He addressed the students, "The Goldman sukuk experience is leading a lot of people in the industry to rethink what are our true values. It has done the market a big favor."
"Looking back now, I would say our industry has come a long way since," he said while adding, "Now we are gradually hearing voices that call for institutional reform and closer scrutiny of sukuk issuance. Some scholars are calling for a robust framework of Shariah governance for the betterment of the industry. Sukuk arrangers, on the other hand, are taking seriously the reputational risk into consideration before accepting any mandate from a conventional lender."
"Scholars are now more than ever before under pressure from the public to scrutinize the transaction. All these are steps in the right direction," he concluded.