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Etisalat deal breaks record for Islamic financing

The Islamic capital market proves its capacity to fund one of the biggest ever deals outside the oil and gas sector in the Middle East.

Deal: Etisalat

Size: $1.6 billion murabaha facility

Date: October 13 2004

Bookrunners: NCB, Samba Financial Group, Citibank and Emirates Bank

Saudi Arabian banks National Commercial Bank (NCB) and Samba Financial Group, in partnership with a group of international and national banks, have completed the first part of the largest Islamic finance contract ever with United Arab Emirates telecoms operator Etisalat. The $1.6 billion murabaha facility, signed on October 13, will fund Etisalat's $3.5 billion bid for Saudi Arabia's new GSM and 3G mobile telecoms licences.

The financing is more than twice the size of the Government of Dubai's planned $750 million sukuk (Islamic bond) issue which is being used to help fund the redevelopment of Dubai International Airport.

"From a regional perspective, the only other project financing taking place that produces bigger deals than this one is in the oil and gas industries," says Leroy Levy, solicitor at Trowers & Hamlins, legal advisors to the Etisalat consortium. "Outside these sectors, this has got to be up there as one of the biggest deals the region has ever seen."

In July, the Etisalat consortium, which includes the General Organisation for Social Insurance, Al Jomaih Co, Rana Investment Company, Binzagr, Abdul Aziz Al Sughiyir Investment Company and Riyadh Cables Group of Companies, emerged as the lead bidder, beating other big international telecoms players such as UK company Vodafone, Spain's Telefónica and South Africa's MTN Group.

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