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Pricing of Emirates Airline’s Unrated Bond Issue
內容大綱
In early 2015, many economies around the world were already dealing with a downturn in the markets when the price of oil dropped steadily, which had a strong impact on oil-dependent economies in the Persian Gulf region. As the corporate debt market decreased considerably, the airline Emirates (owned by The Emirates Group) decided to try a distinctly new approach by issuing a sukuk, or Islamic bond, with the backing of the United Kingdom’s Export Credits Guarantee Department. If successful, it would become the first sukuk certificate guaranteed by an export credit agency. It would also be the largest-ever debt capital markets offering in the aviation sector with a guarantee from an export credit agency. Surprisingly, the sukuk was not rated by any of the three major global credit rating agencies. Why was the sukuk issued by Emirates not assessed by a major credit agency? If it had been, what rating would it have received? Most importantly, what were the sukuk’s risks and how should such an innovative bond be priced?
學習目標
This case is designed for a corporate finance course on capital fund innovations or for a fixed income course on bond ratings and pricing. It also allows for a discussion on function and innovation related to sukuk or Islamic bonds. The case can also be used in an international business and trade course to discuss UKEF’s guarantee of the Emirates sukuk issue or the United Kingdom’s ambition to become the Western hub of Islamic finance. After completion of this case, students should be able to: <ul><li>assess the complexities related to issuing bonds;</li><li>assess complexities related to credit rating, risk, and pricing of bonds; and</li><li>understand the ambition of the United Kingdom to become the Western hub for Islamic finance.</li></ul>