This document discusses Islamic aircraft financing structures. It notes that traditional lenders have exited aircraft financing and tax-based leasing has restrictions. Islamic funds total over $200 billion and offer diversification of funding sources and regional risk understanding. Basic Islamic leasing structures involve Islamic investors, lessors, and airlines, while airline sukuk structures provide greater capital access through shared profits. Sukuks aim to fuse aircraft leasing technology with conventional structures but require complexity to satisfy investors and ratings agencies. Overall, regional demand for aircraft funding is growing while Islamic financing technology and investor appetite are developing.
Presentation Session 4: Arnaud Raynouard, Université Paris Dauphine
ISMED Annual Conference, Defining a Way Forward for Infrastructure Investment in the Middle-East and North Africa (MENA)
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Forming a Cayman SPC - Cayman Fund StructuringBell Rock Group
This overview by Bell Rock Group, provides a summary of the benefits and uses of the Cayman Islands Segregated Portfolio Company. This includes emerging manager platforms, umbrella funds and the segregation of investment strategies for multi-strategy funds, segregated holding companies for holding assets and also segregated asset finance and securitization uses.
Global Private Group
As one of the world's leading and most diverse financial services firm, Global Private Group serves the needs of our clients by offering a world-class project funding platform coupled with straightforward, intelligent advice. We attribute our long-term success to our commitment of always putting clients' interests first; whether it's raising capital for new ventures or to meet growth objectives for expanding businesses. Global Private Group also offers wealth management, capital markets, going public, mergers and acquisition, restructuring, risk and research platform of unrivalled strength and scale.
Presentation for the International Working Group on Export Finance, chaired by the European Commission in Brussels, by Ralph Lerch, Chair of the Export Credit Working Group of the European Banking Federation.
This was the first occasion on which the EBF had been invited to speak in this forum. The EBF’s intervention reported from the commercial banking sphere on export credit conditions.
The IWG originated in a meeting between President Barack Obama and China’s then Vice-President Xi Jinping, in February 2012. They agreed to create an international working group among major providers of government-backed loan guarantees, which would discuss guidelines for export credit financing. The initiative was confirmed at the Sino-US Strategic and Economic Dialogue on 3-4 May 2012.
This multilateral process brings together the Participants to the OECD Arrangement (the existing framework for government-supported export credit) and other major export credit providers including China, Brazil, the Russian Federation, Turkey, Malaysia and Israel. For the European Commission, the forum represents a new challenge in its “outreach activities”, aimed at engaging new international players in the export credit activity in international disciplines on export credits.
Innovative corporate finance solutions szecskay freshfields am cham 15 septem...JustAskSzecskay
Businesses have several options when they raise capital and each company requires a different level of flexibility and risk analysis for financing. Our legal experts prepared a case study on the different products available to a fictitious Hungarian subsidiary of a global enterprise which is considering the refinancing of its bank debts, and a SWOT analysis for compliance and risk management.
Securitization is the process conversion of receivables and cash flow generated from a collection or pool of financial assets like mortgage loans, auto loans, credit card receivables etc into the marketable securities.
Luxembourg has developed into the second largest fund centre in the world. This success has been driven mainly by Luxembourg’s positioning as the leading jurisdiction for retail funds and undertakings for collective investment. A second pillar of funds has been developing markedly, namely investment funds focusing on so-called alternative asset classes, including private equity, real estate/infrastructure and debt, dedicated to a sophisticated and/or institutional/professional investor base.
Intelligent investors know how to explore and underwrite carefully selected and structured risks, as in true fianncial intermediation and hands-on lending.
Investors chasing the illusion of "risk-free" from behind a computer screen cause a lot economic problems and distortions.
Forming a Cayman SPC - Cayman Fund StructuringBell Rock Group
This overview by Bell Rock Group, provides a summary of the benefits and uses of the Cayman Islands Segregated Portfolio Company. This includes emerging manager platforms, umbrella funds and the segregation of investment strategies for multi-strategy funds, segregated holding companies for holding assets and also segregated asset finance and securitization uses.
Global Private Group
As one of the world's leading and most diverse financial services firm, Global Private Group serves the needs of our clients by offering a world-class project funding platform coupled with straightforward, intelligent advice. We attribute our long-term success to our commitment of always putting clients' interests first; whether it's raising capital for new ventures or to meet growth objectives for expanding businesses. Global Private Group also offers wealth management, capital markets, going public, mergers and acquisition, restructuring, risk and research platform of unrivalled strength and scale.
Presentation for the International Working Group on Export Finance, chaired by the European Commission in Brussels, by Ralph Lerch, Chair of the Export Credit Working Group of the European Banking Federation.
This was the first occasion on which the EBF had been invited to speak in this forum. The EBF’s intervention reported from the commercial banking sphere on export credit conditions.
The IWG originated in a meeting between President Barack Obama and China’s then Vice-President Xi Jinping, in February 2012. They agreed to create an international working group among major providers of government-backed loan guarantees, which would discuss guidelines for export credit financing. The initiative was confirmed at the Sino-US Strategic and Economic Dialogue on 3-4 May 2012.
This multilateral process brings together the Participants to the OECD Arrangement (the existing framework for government-supported export credit) and other major export credit providers including China, Brazil, the Russian Federation, Turkey, Malaysia and Israel. For the European Commission, the forum represents a new challenge in its “outreach activities”, aimed at engaging new international players in the export credit activity in international disciplines on export credits.
Innovative corporate finance solutions szecskay freshfields am cham 15 septem...JustAskSzecskay
Businesses have several options when they raise capital and each company requires a different level of flexibility and risk analysis for financing. Our legal experts prepared a case study on the different products available to a fictitious Hungarian subsidiary of a global enterprise which is considering the refinancing of its bank debts, and a SWOT analysis for compliance and risk management.
Securitization is the process conversion of receivables and cash flow generated from a collection or pool of financial assets like mortgage loans, auto loans, credit card receivables etc into the marketable securities.
Luxembourg has developed into the second largest fund centre in the world. This success has been driven mainly by Luxembourg’s positioning as the leading jurisdiction for retail funds and undertakings for collective investment. A second pillar of funds has been developing markedly, namely investment funds focusing on so-called alternative asset classes, including private equity, real estate/infrastructure and debt, dedicated to a sophisticated and/or institutional/professional investor base.
Intelligent investors know how to explore and underwrite carefully selected and structured risks, as in true fianncial intermediation and hands-on lending.
Investors chasing the illusion of "risk-free" from behind a computer screen cause a lot economic problems and distortions.
The Equator Principles Presentation
A financial industry benchmark for determining, assessing and managing social & environmental risk in project financing
AlHuda Center of Islamic Banking and Economics (CIBE) is a well established name in Islamic Banking and Finance with state-of-the-art advisory, consultancy, education, training, research and product development services. AlHuda CIBE has organized number of international customized training workshops on Islamic Banking and Finance to build the capacity of young Islamic finance professionals. As a matter of fact that Pakistan keeps enough potential for the growth of Islamic Banking and Finance, AlHuda CIBE is going to organize Training workshop on Islamic Banking for capacity building in Islamic Banking Professionals.
Uzbekistan Lessor Association (ULA) signed a Memorandum of Understanding (MoU) with AlHuda Center of Islamic Banking and Economics (CIBE), to implement promote Islamic leasing business in the country with the help of its association members.
AlHuda CIBE is going to organize "Three Days Specialized Training Workshop on Islamic
Banking, Takaful and Islamic Microfinance" on 17 - 18 June, 2019 at Tajikistan
AlHuda CIBE is pleased to announce Islamic Finance prestigious Training series in USA Titled: “Islamic Banking & Finance- 26-27 June, 2019 at Washington, DC” and “Islamic Finance & Islamic FinTech- 29-30 June, 2019 at San Francisco, USA”.
AlHuda CIBE is going to organize "Global Takaful Forum" on August 26, 2019 at Istanbul - Turkey.
The objective of the event is to provide adequate knowledge and benefits of Takaful industry to the relevant market. The platform will help analyzing the problems hindering rapid development of Takaful worldwide that would surely help increasing financial inclusion.
CIS Islamic Banking and Finance Forum Auspiciously Concluded in Tashkent.
CIS Islamic Banking and Finance Forum was successfully concluded in Tashkent-Uzbekistan, yesterday. The purpose of that forum was to promote, strengthen and unite the Islamic Banking and Finance industry of the CIS countries, the theme of the forum was “CIS as new destination for Islamic Finance” which also addressed financial inclusion, fintech, Sukuk, Takaful, Islamic capital markets Islamic Microfinance, potential and opportunities of Islamic finance in CIS countries. Distinguished Speakers and industry experts from well serving organizations related to Islamic banking and finance, Islamic insurance (Takaful), and banking industry participated in the event. The aim of the forum was also to discuss the potential of Islamic finance in CIS countries, Investment avenue’s, FinTech, Sukuk, Takaful and Islamic capital markets by gathering stakeholders under one roof. The forum was organized by AlHuda Centre of Islamic Banking and Economics in partnership with multilateral organization Islamic Corporation for Development of Private Sector (ICD) – Islamic Development Bank (IsDB), Uzbekistan Bank Association.
AlHuda CIBE is going to organize "CIS - Islamic Banking and Finance Forum" on 02 May, 2019 along with "Two days post event workshop on Islamic Banking, Takaful and Islamic Microfinance" on May 03 – 04, 2019 at Tashkent, Uzbekistan
AlHuda CIBE is going to organize "Two Days Specialized Training Workshop on Islamic Banking and Finance" on June 20 – 21, 2019 at London, United Kingdom
AlHuda CIBE is going to organize "Three Days Specialized Training Workshop on Islamic
Banking, Takaful and Islamic Microfinance" on 21 - 23 March, 2019 at Dakar, Senegal
AlHuda Centre of Islamic Banking and Economics (CIBE) is a recognized name in Islamic banking and finance Market for trainings, research and advisory over the last 13 years. The prime goal has always been to remain stick to the commitments and provide state-of the-art Advisory Consultancy and Education through various well recognized modes viz. Campus programs, Distance learning programs, Trainings Workshops, Awareness Programs and Islamic Microfinance Products Development all side by side through our distinguished and generally acceptable and known Publications in Islamic Banking and Finance. We are dedicated to serve the community as a unique institution providing trainings, education and consultancy in the field of Islamic Banking & Finance not only in Pakistan but all over the world. We have so far organized more than 300 trainings, 32 successful campus programs and training courses with numerous national and international students.
AlHuda CIBE is pleased to announce its upcoming event the "African Interest-free Banking and Finance Forum" on 6th February, 2019 followed by Post Event Workshop “Interest-Free Banking & Finance, Insurance & Microfinance” on 7th - 8th February, 2019 at Addis Ababa, Ethiopia. The aim of this forum is to address the latest trends, challenges, and opportunities in Finance Industry of Africa.
The aim of this forum is to address the latest trends, challenges and opportunities in Islamic Financial Industry of Africa. This forum will also give an opportunity to all the institutions, organizations and professional to network and exchange business ideas.
AlHuda CIBE going to organize Two days specialized training workshop on Islamic Banking & Finance in Azerbaijan
E: info@alhudacibe.com
http://www.alhudacibe.com/conference2018/
AlHuda CIBE going to organize Two days specialized training workshop on Islamic Banking & Finance on 06-07 September, 2018 at London - United Kingdom
E: info@alhudacibe.com
http://www.alhudacibe.com/conference2018/IBFUK/
AlHuda CIBE going to organize Two days specialized training workshop on Islamic Banking, Finance and Islamic Microfinance at Philippines on 04-05 October, 2018
E: info@alhudacibe.com
http://www.alhudacibe.com/conference2018/IBIMFPH/
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2. 2
• reappraisal by banks of approach to aircraft finance
- exit of some traditional lenders
- restriction of categories of airline credits considered
• difficulties in sourcing equity prepared to invest in the industry
- as a reaction to uncertainty in the industry
- as a result of changes to tax rules
• restriction of tax-based leasing
- loss of traditional tax products: US, Germany and Japan
• curtailing of Export Credit Agency support
- abolition of LASU fixed rate option
- increases in premia and reduction in advance rates
the current environment
3. 3
• Islamic funds estimated at over $200 billion
• growing market
- return of Islamic funds to region
- opportunity to tap into the significant funds of Islamic investors
seeking Shari’a compliant investments
- establishment of regional secondary market infrastructure in Dubai
(DIFC), Bahrain, Saudi Arabia
• over 250 Islamic Finance Institutions worldwide
- Western institutions most active in this market are HSBC Bank plc
(through HSBC Amanah Finance) and Citigroup
- Local financial institutions include Arab Banking Corporation,
Dubai Islamic Bank,Abu Dhabi Islamic Bank, Kuwait Finance
House, First Islamic Investment Bank, as well as Islamic Development
Bank
the Islamic finance market
4. 4
• diversification of funding sources
• investor’s regional understanding of risk
• conventional-style documentation
• bankable governing law
• ability to combine with conventional funding sources
what Islamic finance offers
6. 6
airline sukuk structure
• sukuk defined by AAOFI’S Shari’a standards as
“Certificates of equal value representing undivided shares in
ownership of tangible assets, usufruct and services or (in the
ownership of) the assets of particular projects or special
investment activity”
• can provide greater diversification of funding sources than ‘basic’
Islamic leasing structure
• access to larger volumes of capital
• potential to provide liquid investments for Islamic investors
7. 7
airline sukuk structure
• sukuk gives investors share in profits generated by investment in
asset
– ijara - based cash flows most appropriate for sukuks
– real estate ijara - based sukuks
Malaysia $600m issue (June 2002)
IDB $400m issue (July 2003)
Qatar $700m issue (September 2003)
Bahrain $250m issue (June 2004)
Saxony € 100m issue (August 2004)
Dubai DCA $750m issue (proposed)
• problems with morabaha - based sukuks and tradeability
– sale of debt (bay al - dayn) prohibition
• aircraft ijara - based sukuk would fuse aircraft ijara technology and
conventional EETC technology
8. 8
airline sukuk features
• relationship of sukuk holders to issuer is that of investor, not
creditor
• sukuk holders are joint owners of trust assets, being
– aircraft (subject to leases)
– lease revenues
– lease rights
• sukuk holders exercise rights as owners through sukuk agent, who
is empowered to enforce lease rights against airline, and can be
compelled to do so by relevant proportion of sukuk holders
• sukuk holders rights against Issuer are limited recourse to the trust
assets
9. 9
airline sukuk features
• complexity dictated by investor/rating requirements
– rating agencies (eg Standard - Poor’s, Moody’s, Fitch) apply
conventional rating criteria - Shari’a compliance not relevant - so need
to minimise reliance on performance of ijara
• likely rating agency focus on
– level of over - collateralisation
– bankruptcy protection
– quality of assets
– liquidity facility
• possibility of credit enhancement
– asset value guarantee
– investment - grade put option
10. 10
airline sukuk features
• investor loan to value ratio enhancements restricted by “one class
only” certificates
– possible solution: morabaha - based subordinated tranche (on limited
recourse basis)
• level of bankruptcy protection depends on jurisdiction of airline
– relative under-development of regional bankruptcy laws (compared to
s1110 US Bankruptcy Code)
– repossession and deregistration risk mitigated by international route
network and external flagging
• liquidity facility - classic US EETC 18 month requirement versus 42
month “Iberbond” liquidity line
– conventional interest - bearing liquidity line not possible
– possible solution: morabaha - based secured liquidity facility
11. 11
airline sukuk features
• ‘standard’ ingredients will include
– aircraft management and remarketing agreements
– lessor ‘ring fenced’ from other transactions for bankruptcy remoteness
– lessor established in tax neutral jurisdiction
• listing issues - eg: Luxembourg/London/DIFC
• Shari’a board approval
– structural and documentation review
– written opinion in prospectus
– composition of Shari’a board
12. 12
airline sukuk structure
Sukuk Holders
Issuer
SPV Lessor
Airline
Head Lease
(Ijara)
investment
(85%) Declaration of Trust
Airline
Sub Lease
(Ijara)
Up-front purchase price (85%)
Deferred purchase price (15%)
Liquidity
Provider
Liquidity
Facility
Mortgage
Asset
Value
Guarantee
Asset Value
Support Provider
AirlineAirline
Sub Lease
(Ijara)
Sub Lease
(Ijara)
Sale of aircraft
(Morabaha)
13. 13
market outlook
• regional inflow of Islamic funds increasingly matched by greater
sophistication of regional financial intermediaries and investors
• airlines’ requirement for funding seems likely to outstrip
conventional funding sources available to region due to
– huge aircraft orders
– need for specialised appetite for regional risk
• run of innovative Islamic aircraft financings (eg. by Emirates) have
helped develop ‘downstream’ Islamic aircraft financing technology,
while non-airline sukuks and airline bonds (eg. Emirates’ $500
million eurobond issue) have established investor appetite for this
asset class