BLME arranges $50m syndicated Ijara shipping facility

The London-based Shari’ah-compliant bank, Bank of London and The Middle East (BLME), has concluded a $50m syndicated Ijara leasing facility for Dubai shipping company Al Ghadeer Marine Shipping.

The facility will be used to purchase the 53,000DWT double-skinned bulk carrier Sara V – the largest acquisition by Al Ghadeer to date – and is the first international syndicated debt financing to be raised by the company to fund its expansion and acquisition programme.

BLME acted as mandated lead arranger, advising and structuring the facility in conjunction with its Shari’ah Supervisory Board, which acted as Shari’ah advisor on the transaction. A special purpose vehicle was also established in the Cayman Islands by BLME to act as Muharib – a business manager or entrepreneur who does not invest capital, but provides skill and effort in the transaction and holds beneficial title to the vessel.

“In an Ijara facility, the asset (in this case a ship) is purchased by the lessors and leased to the client for a periodic rental fee,” said Rodney Ballard, director of corporate banking at BLME. “Depending on the agreement, the asset may be transferred to the lessee on the expiry of the lease, either against payment of the residual value, the market value or, if the asset has been amortised completely, without any further payment. In this transaction, the asset will be transferred without any further payment.

“It is very similar to conventional ship financing, although in conventional financing, part of the rental is very often expressed as being the equivalent of the interest on the amount outstanding,” he added.

Jordan International Bank was specifically requested to act as co-lead arranger by Al Ghadeer, owing to their existing relationship, and Kuwait Finance House in Bahrain, Boubyan Bank in Kuwait and Capital Bank in Jordan also joined in syndication.

Al Ghadeer chairman, Hamdi M. Ajlan, said he was pleased to have been able to conclude the transaction with BLME. “We appreciate the support and flexibility they have shown in delivering this financing to assist us in meeting our planned acquisition,” he added.

“This is an important milestone for both Al Ghadeer and BLME in our first year of operations,” said BLME CEO Humphrey Percy. “It further substantiates our belief in the growth and diversity of the Shari’ah-based funding that BLME is now able to deliver and demonstrates our increasing ability to lead and arrange Shari’ah-compliant financing to support the growing relationships we are developing in the Middle East, Europe and the US.”