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First ever Islamic bond for the shipping sector
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International law firm Norton Rose advised on the first ever transaction in the shipping sector to use an Islamic bond issue. The $26 million private issue utilised an Ijara (lease) Sukuk arrangement through a Jersey based issue vehicle.
The firm acted as counsel to the Islamic issue vehicle arranged by ABC International Bank Islamic Asset Management Limited.
Supporting the Sukuk was a lease financing of the 300,000 tonne VLCC Venus Glory, under which the vessel is able to remain in the ownership of the Pacstar Group, controlled by Saudi Arabian interests, and continue to be chartered to GCC oil and petrochemical conglomerate Vela International Marine Ltd.
Abu Dhabi Commercial Bank (ADCB), ABCIB Islamic Asset Management and ABC Islamic Bank agreed to act as joint underwriters and placement agents for the corporate Sukuk issue by Al Safeena I Ltd.
Seumas Gallacher, Senior Vice President and Head of the Corporate Banking Group at ADCB, said of the transaction: “The opportunity to participate in this well structured Islamic tranche of a regional oil-related transaction has a particular attraction for ADCB. The market economics for such an asset as the Venus Glory look very good and we would hope to involve ourselves in similar transactions in the near future.”
Norton Rose’s head of Islamic finance, Neil D. Miller, said: “This transaction has brought together Norton Rose’s key strengths in Islamic finance and shipping finance. The investors are able to make their Islamically compliant investment via the purchase of Sukuk which gives them a beneficial right in the use of the vessel. We were then able to apply this investment into a pre-existing leasing structure.
“The benefit of this structure is that it did not interrupt the pre-existing leasing chain and also allowed conventional finance to continue to be taken by the owners.”
Norton Rose acted on the largest Islamic tranche utilised to date in a project financing - an Ijara based facility of US$530 million for the financing of the QatarGas II LNG Liquefaction facilities. The firm also acted for the arrangers on the only LNG carrier financed to-date solely using Islamic finance techniques, Brunei LNG’s mv
ABADI.
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