Khadraw y Limited Emirates Airlines

INTRODUCTION Khadrawy Sukuk by Emirates Airlines is considered to be another milestone in the industry, whereby, through its innovative structure, the Sukuk came to finance Aircrafts manufacturing   process,   “an   Istisna’a”   ,   while   keeping   the   instrument tradable from a Sharia perspective. Where All debt-based   contracts   such   as   Murabaha   and  Istisna’a,  in   Sharia, are deemed untradeable unless comingled with other equity based assets, constituting at least, 33% of the portfolio. It has always been a challenge to use Istisnaa contracts, and thereby most arrangers instead used straight forward Tawwaruq models. Where the originators sells the commodity for spot price, and use proceeds to fund his purpose. However, in this innovative   structure,   Istisna’a   was   deployed   to   procure 4 Aircrafts from Airbus, while manipulating the equity portion to allow for and sustain the tradability of the Sukuk from a Sharia perception. We are certain this sukuk, with its innovative structure, has paved   the   way   for   the   use   of   Istisna’a   contracts to finance manufacturing and procurement agreements. SOVEREIGN GUARANTEE BY UK. The Sukuk is guaranteed by the Export Credits Guarantee Department of the UK Government, guaranteeing both Airbus and payment obligations of Emirates Airlines. The Guarantee comes as a step towards making London the global hub and center for Islamic Finance. The Guarantee has certainly had significant positive effects on the credit rating of the Sukuk. FINANCIAL EFFECTS OF THE SUKUK Khadrawi Limited Sukuk was tightly priced at 2.471% with the issue size of USD 913,026,000 for a 10 year maturity. The Sukuk attracted huge demand. Of which approximately 39% of the Certificates were distributed to the Middle East and Asia, 32% to Europe and 29% to the United States. The Certificates were listed on London Stock Exchange and NASDAQ Dubai. Indeed the British sovereign guarantee has helped Khadrawi yield a tight price compared to Emirates Airlines inaugural Sukuk, Medjool Sukuk Ltd at 3.875%, and other dollar corporate issuances in the same market with yields at 4.5% and higher.