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Institutional investors tend to support more investment grade (IG) debt issuers. For anchoring deals, investors (with an IG mandate) have certain criteria such as credit rating of the issuer, right pricing levels, market conditions on the day of pricing, etc.
Under International Capital Market Association (ICMA) rules around European joint lead managers’ (JLMs) orders, only unsolicited trading orders that reflect genuine demand for the transaction would be included in orderbook updates to investors.
However, solicited lead orders from JLMs will no longer be reported to the market.
Types of Orders
Traditionally, GCC JLMs tend to provide the so-called ‘ALM Order’ and/or ‘JLM Order’. The purpose of the JLM Order is to assist the issuer during the book-building process (e.g. to provide a lead order of up to 20% of the issuance size), whereas the ALM Order tends to support the transaction by providing an underwriting commitment (e.g. up to 10% of the issuance size).
Prior to the issuance or the extensive marketing, it is advisable for the issuer to seek commitments from its relationship institutions and government entities (i.e. its already-established investor base).
Traditionally, central banks tend to deploy liquidity into high-quality Sukuk. Furthermore, the issuer should try to appoint banks which are able to come in with large ticket sizes/anchor orders as JLMs so that the transaction carries the momentum it deserves from as early as when the books go live.
Launching the Transaction
JLMs should also be able to source out demand from key Islamic investors and accumulate large anchor interest to drive momentum as soon as the books open. Depending on the credit profile of the issuer, it is advisable to select a global JLM that has deep access to diverse pools of liquidity (i.e. a distribution platform with unique connectivity across both emerging markets and IG investors).