The structuring of the world’s largest global Islamic securities issue yet is soon to be unveiled before an international audience. The landmark US$750mn Islamic bond (sukuk) is to be issued by Dubai Civil Aviation Authority as part of the huge US$4.1bn expansion of Dubai international airport, United Arab Emirates.
The five-year Islamic ijara sukuk will be listed on the Dubai Financial Market and Dubai Islamic Bank is lead manager, arranger and bookrunner for the sukuk that is to be issued “in the very near future,” according to the bank.
Sukuk structures are a type of securitisation backed by assets acceptable under Islamic techniques of financing which prohibit interest.
Commonly known as an Islamic debt market instrument, sukuks have been gaining popularity among investors. Sukuks are shariah compliant, tradeable and fairly easily liquidated. For these reasons they have generated interest not only among Islamic investors but also the conventional sector.
With opportunities for shariah-compliant investments currently few, Islamic investors have tended to buy and hold which has held back the development of an active secondary market. Critical mass has to be reached before an active secondary market can thrive.
Recent issues of sovereign sukuks from Malaysia, Bahrain and Qatar met with acclaim. The popularity of sukuks is now spreading to corporate issuers, a move that is seen as further developing a capital market.
Including the Dubai Civil Aviation sukuk of US$750mn, the total sukuk market stands at around US$3.5bn to date.
The international Islamic finance industry has been growing at a projected rate of 15% a year and is estimated to be worth something in excess of US$300bn as new Islamic-compliant financial instruments and products are introduced.