The landmark Islamic bond, or Sukuk, is being used to finance Dubai-based container terminal operator DP World’s £3.3bn recommended bid for P&O.
The unique financing deal combines a $6.5bn (£3.76bn) loan with a $9.3bn (£5.38bn) Islamic bond. The Sukuk, which will be governed by Dubai and English law, is structured as a pre-IPO convertible, which means that, at maturity, if DP World decides to float P&O, buyers of the bond receive 70 per cent of their investment in cash and 30 per
cent in shares. The investor return on the IPO is approximately 3 per cent less than if the bond is redeemed normally, but investors will hope to receive an eventual upside through the share price.
One of the lawyers involved in the deal told The Lawyer: “IPOs are incredibly popular in the Middle East and are often 100 per cent oversubscribed, so demand for the bond will potentially be very high.”
The funding package is structured so that the bond is subordinated to the loan, so in the case of any default bond noteholders will be paid last.
A&O advised Deutsche Bank on the loan and Barclays Capital on the bond, Clifford Chance acted for DP World and DWS advised Dubai Islamic Bank and Barclays Capital on the bond.