Emirates airline getting a taste for sukuk

Published March 7th, 2013 - 11:50 GMT
Emirates airline is planning another sukuk sale, its second this year
Emirates airline is planning another sukuk sale, its second this year

In what would be its second bond sale this year, Emirates has mandated banks to arrange a potential dollar-denominated, benchmark bond [or sukuk] sale subject to market conditions, according to lead arrangers Citibank and Standard Chartered Bank.

Confirming the same, Emirates said in a statement to Gulf News yesterday: “Emirates has mandated Citigroup and Standard Chartered Bank as Joint Global Coordinators and Joint Lead Managers, together with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank and Emirates NBD Capital as Joint Lead Managers, to arrange a series of fixed income investor meetings in the UAE and Europe commencing on March 7,” adding that a USD Regulation S Sukuk benchmark offering may follow subject to market conditions.

A benchmark-sized bond is typically $500 million.

The March 7 meeting in Dubai and Abu Dhabi will reportedly be followed by Geneva and Zurich on March 8 and closing in London on March 11.

Emirates in late January issued a $750 million, 12-year amortising bond.

The world’s largest airline by international traffic, said recently it expects an 18-20 per cent increase in sales this year, besides a 12 per cent increase in the number of passengers, as it expands its operations in Asia.

With liquidity trickling back into the market, airlines have started to make a comeback for fund-raising.

Etihad Airways, for instance, said on Tuesday it is briefing major institutions at financial roadshows in New York and London. The Abu Dhabi-based carrier has attracted support from over 60 institutions globally, which now provide over $7.1 billion in cumulative funding for the airline’s expansion.

While Etihad did not specify if it’s actively looking to raise funds, its President and CEO, James Hogan, said in statement, the airline was committed to a “diversified finance strategy”, including traditional and emerging finance mechanisms across financial institutions in different regions.

Etihad uses a variety of funding forms, including commercial debt, Islamic structures, operating leases, tax leases, and European and US export credit agency supported financing, and the funding is used to grow its fleet.

According to Peter Morris, chief economist at aviation consultancy, Ascend, with new aircraft deliveries and robust finances of the key Gulf airlines, the only problem they have may be deciding between competing financial instruments. “With global bond rates being exceptionally low, these airlines are in a position to take advantage, with their financial credibility boosted by their continued expansion and generally improving profitability,” he said.

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