First Islamic announce aircraft portfolio joint venture

The joint venture vehicle has acquired lease (Ijara) interests in 21 aircraft at a cost of $142.9 million, leased to leading flag carrier airlines or their subsidiaries. The portfolio consists of a diversified mix of narrow body, regional jet and turbo-prop aircraft leased to British Airways, Air Canada and Brit Air (a wholly owned subsidiary of Air France).

Part of the portfolio was leveraged using Ijara-based financing facilities totaling approximately $85.3 million, provided by Arab Banking Corporation (BSC), CIT Group and Natexis Banques Populaires.

First Islamic and its co-investors hold the majority ownership in the joint venture, with Montrose owning a minority stake. Montrose acted as overall transactions arranger whilst First Islamic acted as equity arranger. In addition Montrose, in its role as servicer, will be responsible for day to day management of the leases in the portfolio. Montrose is a leasing specialist in the secondary market, serving institutional investors with portfolio management, lease advisory services and proprietary products, and currently manages leased assets totaling $5 billion in original equipment cost, of which over $3 billion consists of aircraft.

First Islamic projects that the investment will generate an attractive blended Internal Rate of Return over a five-year investment horizon, inclusive of an annual cash yield that will be distributed on a quarterly basis.

Atif A. Abdulmalik, First Islamic's Chief Executive Officer, said "We believe that this is an opportune time to invest in aircraft. Following the recent economic recession and the events of September 11 2001, we think that the industry is near the bottom of what is probably the worst downturn the aviation industry has experienced. Earlier downturns in 1981 and 1991 were followed by strong recoveries, and we believe the long-term outlook for the aviation industry remains positive."

Mohamed A. Nooruddin, the Bank's Executive Director, Investment Placement, said "The portfolio is structured to generate a stable and steady income flow for investors. The aircraft leasing industry is modestly correlated to equity markets and thus represents an attractive way of diversifying an investment portfolio."

Raymond C. Eyre, Managing Director and partner of Montrose, said "We are pleased to be part of what we believe is the first Shari'ah compliant aircraft portfolio. We believe that the portfolio provides an attractive diversification with well-recognized, top-tier lessees. This investment product provides an alternative source of capital to the airline industry with attractive returns for the investors."

First Islamic Investment Bank E.C., a Bahrain-based investment bank, was established in 1997. Today, with a paid-in share capital of $112.5 million, and over 80 shareholders, First Islamic's mission is to provide innovative, Shari'ah compliant investment banking products to institutional and individual investors internationally.

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