Bahrain-based First Islamic Investment Bank (FIIB) is entering the final stages of a sizeable buy-out deal, says FIIB chief executive officer Atif Abdul-Malik. He says that two or three buy-out deals are expected to be closed this year. 'There are two companies we are currently looking closely at, one in manufacturing and the other a technology operation. Both are in the $75 million-150 million bracket, and I expect one deal to be closed by August.'

Since its formation in late 1997, FIIB has specialised in private equity transactions. Recent major deals include the $175 million acquisition of a majority stake in a US telecommunications firm and the $40 million purchase of two US canoe equipment companies (MEED 19:2:99; 10:7:98).

FIIB also plans to diversify its operations with the launch of a sharia- compliant liquidity management programme in conjunction with Societe Generale. Abdul-Malik says that the programme would fill the substantial gap in the Islamic market for short-term liquid funds. 'Where do Islamic institutions park short-term funds? A lot of the long-term money goes into private equity, the medium-term funds go into listed equities, but there are few acceptable instruments for short-term funds,' he says.

Abdul-Malik adds that the FIIB fund will be based on lease financing in the US. 'We plan to buy equipment leases in the US, bundle them together, and then securitise them,' he says. 'We then have an asset-backed security which can be used as a money-market tool.' He says the fund will offer competitive money-market rates for short-term placements.

Liquidity in the fund, which is expected to attract short-term placements lasting a matter of days or weeks, has been guaranteed by Societe Generale, which will also structure the transactions conducted by the fund.

The fund is scheduled to start operations in the late summer and pre- marketing is due to begin in July, says Abdul-Malik. FIIB has already arranged an initial subscription of $100 million for the fund, for which minimum subscription is fixed at $5 million, and further growth is expected. 'The assumption is that there will be considerably more deposits than redemptions,' says Abdul-Malik. 'We expect the fund to grow rapidly. The sky's the limit, but we expect it to have reached $400 million-500 million by the end of the year.'