First Islamic aims for US private equity market

26 September 1997

First Islamic Investment Bank, a newly-founded bank based in Bahrain, has recruited two former Investcorp employees to help it create a private equity business in the US. First Islamic raised $100 million in capital with a private placement earlier this year in the Gulf and Malaysia (MEED 20:6:97).

The two ex-Investcorp staff are David Crosland, who will source private equity deals for First Islamic in the US, and Edward Underwood, who will run the bank's administration and operations and work on the structuring of deals and the management of companies after they have been acquired. The bank has also hired a US lawyer, Henry Thompson, as its general counsel. A string of lucrative corporate buy-outs in the US and Europe have given Investcorp a reputation as the Arab world's most successful investment bank and made it a model for other Bahrain-based banks.

Atif Abdul-Malik, a member of First Islamic's management team who has also worked for Investcorp, says that with this year spent in raising capital for the bank, 1998 will effectively be its first year of operations. In the field of private equity, the initial focus will be on the US, then Southeast Asia, then the Middle East. Abdul-Malik says the bank has come up with ways of using Islamic financing techniques like murabaha (deferred payment) and leasing which it can use to raise finance for acquisitions, as substitutes for interest-bearing debt.

First Islamic has a Malaysian subsidiary, Commerce MGI, which has acted as an adviser on structured finance deals in Southeast Asia. Abdul-Malik says that the recent downturn in the Malaysian economy, spurred by a sharp fall in the currency and the local stock market, will not have a long- term impact on the bank's business there. 'The deals we were working on were already signed. The downturn did affect the possibilities for future deals, but this is a temporary thing.'

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