DCA takes sharia finance

13 April 2006

Dubai's Department of Civil Aviation (DCA) has issued a $1,000 million ijara facility to part-fund the expansion of Dubai International Airport. The three-year facility is due to be converted into a sukuk later in the year. It was lead arranged by Dubai Islamic Bank (DIB) and was priced at 38 basis points (bp) over Libor.

The participating banks were DIB, ABN Amro, DBS Bank, Deutsche Bank, DEPFA Bank, DZ Bank, Societe Generale, Standard Chartered Bank and West LB. Galadari & Associates acted as legal adviser to the Dubai government; Denton Wilde Sapte advised the banks.

'The structuring, with a ijara facility taken first and a sukuk issued later, was dictated by timing, because the funds are needed quickly to proceed with the airport expansion,'

says a banker involved in the deal.

DCA issued a $1,000 million sukuk in late 2004, also to raise funds for the airport expansion. The five-year instrument, at the time the biggest-ever, was priced at 45 bp (MEED 12:11:04).

The Dubai government is increasingly looking to sharia-compliant financing for its projects. The Ports, Customs & Free Zone Corporation in early 2006 launched a $3,500 million convertible sukuk, partly to finance the acquisition by DP World of the UK's P&O (MEED 20:1:06).

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