International law firm Clifford Chance’s Dubai office recently advised on the issuance of new Islamic bonds, or sukuk, worth $5 billion. The transactions, which came out of the United Arab Emirates and Saudi Arabia in January, highlight a shift in recent months towards sukuk from conventional bonds.
Dubai-based Clifford Chance partner Debashis Dey led the team on Emirates Islamic Bank’s $1 billion trust certificate issuance programme. Associates Xuan Jin and Alekhya Prakash also worked on the deal. The teams that advised the joint lead managers for the Islamic mortgage lender Tamweel’s $300 million sukuk, and the managers of Majid Al Futtaim Holding’s $400 million issuance were also led by Dey.
Clifford Chance’s Abu Dhabi partner Matthew Cahill and Dubai counsel Stuart Ure led the team advising the joint lead managers of First Gulf Bank’s $500 million sukuk under its $3.5 billion issuance programme. The transaction was supported by associates Peter Wielgosz and Mark Dickinson in Dubai. Cahill also teamed up with Saudi Arabian law firm Al-Jadaan & Partners in advising the Saudi Arabian General Authority of Civil Aviation (GACA) on its debut 15 billion riyals ($4 billion), ten-year Islamic bond, which is fully guaranteed by the Saudi Ministry of Finance.
A recent report by ratings firm Standard & Poor’s said the global financial crisis has boosted the popularity of Islamic bonds. As European banks reduce their overseas exposure amidst an increase in capital requirements, sovereign issuers and financial institutions are looking to tap the excess liquidity available in regions that were less hard hit by the economic downturn, such as the Gulf and Asia.
Fitch Ratings in January said that the sukuk market will serve as a useful source of additional fuding over time as sovereigns outside the Middle East and other largely Islamic regions seek to issue. The report added that those issuances will meet pent up demand from Islamic institutional investors and banks to diversify their bond holdings. The ratings firm added that GACA’s government-guaranteed deal could pave the way for more sukuk issuances from Saudi Arabia. ALB
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