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Most innovative deal: East Cameron Gas Company

Pushing beyond the boundaries

Given current geopolitical tensions it speaks volumes for the widening appeal of Islamic finance as an asset class that the most innovative deal of 2006 should involve the first-ever Islamic securitization originated out of the US. In July, Texan oil and gas company East Cameron Partners raised $165.6 million via arrangers BESC and Merrill Lynch in a sukuk transaction securitizing ECP’s ownership of oil and gas assets in a field in the Mexican Gulf.

As well as marking the first time that securitized US assets have been offered to the Islamic finance market, the transaction was also the first to feature embedded Shariah-compliant hedges and was also notable for being the first Islamic securitization to be rated by Standard & Poor’s.

Given an attractive 11.25% annual rate of return, the deal sold to a mix of hedge fund and industry-specific investors, primarily in the US, many of which were buying an Islamic finance product for the first time. Hani Deaibes, head of MENA debt capital markets at Merrill Lynch, says that the ECP deal showed that more and more conventional investors are looking through the Islamic finance structure and focusing primarily on the underlying credit risk.

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