Wednesday 29, August 2018 by Jessica Combes

ADGM’s aviation finance structure utilised in Sukuk issuance

 

Abu Dhabi Global Market (ADGM), the leading international financial centre (IFC) of Abu Dhabi has facilitated the transaction of a 12-year Sukuk issued by Natixis and Noor Bank. 

The transaction marks a milestone for ADGM’s aviation finance and leasing sector. It is the first instance where an ADGM structure has been used specifically to hold aircraft assets for issuing Sharia compliant bonds.

The Sukuk transaction demonstrates the evolving, innovative measures ADGM has taken to cater to and meet client needs.  It has integrated the benefits of an internationally recognized legal and regulatory framework with Islamic financing requirements.  The deal provides access to Islamic investment opportunities with the transparency of common law regulations and the integrity of an International Financial Centre.

The transaction follows the successful completion of the first aviation sale and leaseback transactions arranged by Natixis in ADGM in late 2016 and the registration of three international aviation leasing companies earlier this year. Natixis designed and arranged the Sukuk for this new transaction. Their continued use of ADGM structures illustrates the highly progressive and diverse offerings that are available.  ADGM, being the only IFC in the region to directly apply English Common Law via an independent modern judicial system that caters to all aspects of business needs.  Its regulatory regime also includes the enactment of the Cape Town Convention and Aircraft Protocol 2001, providing investors with familiarity and confidence in conducting transactions. In addition to a robust legal framework, registered companies also benefit from a favorable tax environment of zero per cent corporate tax and an extensive and growing network of double taxation treaties.

“Aviation finance and leasing is truly global in its recognition and usage and is one of the world’s fastest-moving sectors, particularly in the MENA region.  ADGM’s strong characteristics combined with its continuous innovations and the UAE’s commitment to economic diversification will be a catalyst in increasing growth for customisable, client-centric solutions such as the Natixis-Noor Bank Sukuk,” said Dhaher Bin Dhaher Al Mheiri, CEO of the ADGM Registration Authority.

Abu Dhabi, with a central geographic position, provides an excellent base for aviation finance and leasing, located in the high-potential Middle East and with close ties to other growth markets such as India and Africa. It is home to several of the world’s largest sovereign wealth funds, presenting an abundance of regional investor capital opportunities coupled with ADGM’s thriving ecosystem of aviation professionals with extensive expertise in aviation finance.

“We were delighted to work with ADGM on this transaction, which allowed us to use our aviation and Islamic finance expertise to offer Islamic investors diversification into an otherwise unreachable asset class and open new sources of funding for aviation borrowers. We look forward to strengthening our cooperation with ADGM as it continues to expand its role as an aviation financing hub,” said Simon Eedle, Regional Head of Natixis Corporate & Investment Banking, Middle East.

 

The Middle East is forecasted to be one of the fastest growing aviation regions over the next 20 years. ADGM solutions and long-term sector strategy aim to position the IFC and Abu Dhabi as an international aviation finance hub that has integrated innovative tools and structures to deliver bespoke solutions for both Islamic and Conventional transactions.

Features & Analyses

Economics Adapting to a new era

  Abdullah Al-Fozan, Chairman of KPMG MESA and KPMG Saudi Arabia, provides an exclusive commentary on the Kingdom’s business… read more