Islamic bonds that pay returns based on cash flows from airports and utilities rather than income from property may stay in favor in the coming year after a drop in Persian Gulf real-estate prices shook investor confidence.
Saudi Electricity Co.’s 7 billion-riyal ($1.9 billion) sukuk sold in May was underwritten by income from fees such as connection charges, according to its prospectus. Nomura Holdings Inc., Japan’s largest brokerage, sold Islamic debt in Malaysia in July using aircraft as the underlying asset. Pakistan raised 51.8 billion rupees ($605 million) in a Nov. 8 Islamic bond sale linked to the Jinnah Terminal at Karachi’s Quaid-e-Azam International Airport.
The 50 percent decline in real-estate prices in Dubai from their peak in mid-2008 contributed to a 31 percent retreat this year in global sales of Islamic debt that pay asset returns to comply with the religion’s ban on interest. Offerings are picking up following an agreement by Dubai World, one of the emirate’s three main state-owned holding companies, in September to reschedule debt payments.
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