Al-Salam Bank-Bahrain BSC today announced the acquisition of an equity stake in a Boeing 777-200ER aircraft on long term lease to Malaysian Airlines, marking the Bank’s second transaction in Malaysia. The deal comes following the joint-venture it announced with CIMB in 2006 to develop a prime real estate development off Penang.
Yousif Taqi, the Chief Executive Officer of the bank commented: “The Bank continues to source and participate in transactions that further build the bank’s investment portfolio with quality assets. The equity financing of high quality aviation assets such as this sets us apart from the competition and paves the way for further investment opportunities in the transportation sectors, which have traditionally been areas for growth and popular with Islamic investors”.
This US$83 million Islamic compliant aircraft transaction involved the combination of equity and debt in a unique structure optimized to deliver high yield investment returns. EVP & General Counsel, Mohammed Paracha commented: “This exciting transaction demonstrates the Bank’s ability in sourcing and structuring highly complex asset transactions involving leading global players. The airline industry continues to see growth, especially for operators such as Malaysian Airlines where passenger revenue and yield have reportedly significantly increased in 2006.
Malaysia currently has a credit rating of A+ as a sovereign credit (stable) for local currency and A- (stable) for foreign currency by Standard & Poors. Additionally, Malaysian Airlines is one of the longest established airlines operating in South-east Asia and the Far-east, flying to over 70 destinations and over six continents.
Executive Vice President & Investment Group Head, Dr. Omar Kamal commented on the Bank’s strategy: “One of the main challenges for the Bank’s Investment Group is to create diverse investment opportunities in sectors and jurisdictions that appeal to our investors. In a relatively short period of time, the Bank has established itself as a rapidly emerging powerhouse in the investments arena with transactions announced in Malaysia and China and transactions in Bahrain, Hong Kong, Pakistan and Europe in the pipeline.”
Novus Aviation Group, the asset manager and a pioneer in Islamic aircraft structuring and leasing, will be responsible for the day to day management of the aircraft with this transaction representing the 18th Islamic structured transaction which they manage.
MPL a Novus Aviation Group related company is a co-investor in the aircraft acquisition. Novus Aviation Group’s Chief Executive Safwan Kuzbari commented on its relationship with Al Salam: “This was a particularly challenging transaction to structure due to issues surrounding the existing leasing arrangements. It represented our debut transaction with Al Salam with the aim of concluding several additional aircraft transactions in the near future. We were very pleased to debut with Al Salam.”
The Bank received advice on the technical aspects of the transaction by the specialist aviation firm, Spectrum Capital London Limited and AMS Aircraft Limited. Novus Aviation Group acted as lease manager. DVB Bank, Fortis Bank, PK Airfinance and Ahli United Bank provided the debt financing. Clifford Chance acted for the financiers, Norton Rose (London) acted for Al Salam Bank; Norton Rose (Singapore) acted for Malaysian Airlines with McKinney Bancroft & Hughes acting on Bahamian law issues.
