The Singapore and London offices of Ince & Co have helped structure a unique Islamic finance deal for Malaysian Islamic shipping fund Safeena. The firm advised the fund on its investment in a 19,900 DWT stainless steel chemical tanker, structured through a deferred purchase and forward lease arrangement provided by Jimbaran, a Norwegian manager of chemical tankers.
Ince & Co’s team, led by Singapore-based Martin Brown (pictured), London partner Peter Measures and Singapore associate Gregory Xu, spent several months with Safeena structuring the investment to comply with Shariah laws. Work included drafting purchase and lease documents and structuring the investment with a conventional (non-Islamic) financing arrangement for a sister vessel on the transaction.
Ince & Co was approached by Safeena due to Brown’s prior experience on conventional and Islamic financing deals. However, the deal also brought mandates for a string of other firms from across Asia – Malaysia’s Azmi & Associates, Indonesia’s MKK, Singapore’s Allen & Gledhill, Norway’s Vogt & Wiig, offshore firm Walkers and Marshall Islands’ Blank Rome.
This deal was important for all the firms involved for a number of reasons. Safeena is Malaysia’s only Shariah-compliant shipping fund and this deal represents its first investment. Importantly, the purchase and forward lease structure (also called a istisna'a-ijarah structure) is the first time such a vehicle has been used by a shipping fund. “This type of financing – where one party requests the other to build or provide an asset and then to lease it back after that – is usually applied towards construction financing … or for home loans where the house is being built,” said Ince & Co’s Martin Brown. “It has been used in the shipping industry before, but never by a fund. In advising Safeena, we needed to create a Shariah-compliant structure that could fit around an existing conventional financing. As a result, more traditional forms of equity infusion could not be used.”
Due to these requirements, the deal could become an example for others. “It will become a precedent for certain transactions, especially where an existing conventional financing on sale/leaseback terms has to be accommodated,” said Brown. “The risk profile, however, would make it extremely attractive in many other circumstances as well.”
The firm said it is looking forward to working on future deals for its new client. “Details for new deals are being worked out and are in the pipeline. Ince & Co has received confirmation that we will be appointed in upcoming transactions that Safeena and the financial arrangers will be involved in,” said Brown.
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