Restructuring of Islamic Finance Transactions in the Middle East: A New Frontier for Practitioners |
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Owen Delaney
Associate
Vinson & Elkins
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Hessam Kalantar
Counsel
Vinson & Elkins |
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The idea that the Islamic finance instruments somehow offered protection from the wider global financial crisis has generally proven to be false. On the contrary, the market for Shari'a compliant financial products appears to have been hit hard by the economic doldrums. Since the peak in 2007, when almost $35 billion worth of sukuk financing was issued worldwide, volumes have dropped dramatically. Only about $15 billion worth of sukuk were issued in 2008, recovering to approximately $23 billion in 2009. Although there are reports that the sector is expected to rally in the near term, the turmoil in the capital markets and the continuing hesitation on the part of the financiers to resume lending has impacted not only the ability to consummate Islamic finance transactions and demand for Shari'a compliant products, but also investors' perception of risk in Islamic instruments.
A series of sukuk defaults in Kuwait, the UAE and Saudi Arabia have precipitated efforts on the part of corporate boards and creditors to restructure financial liabilities, both within and outside the context of insolvency, in order to maximize the value of corporate assets, extend payment terms and avoid litigation of claims whose outcomes are largely untested in local courts...Read Full Story  |
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