16 January 2013
Interview with Dr. Manfred Dirrheimer, CEO of FWU Group
FWU Group, a Munich-based financial services company, recently issued a USD 55 million sukuk, the first ever by a German corporate entity and the largest ever from a European corporate. This is also the first sukuk to utilize a computer software program and intellectual property rights under an Ijara (sale and leaseback) structure.
FWU, which primarily offers global conventional and takaful (Islamic insurance) solutions through distribution arrangements in Europe, the Middle East, Pakistan and Malaysia, entered into the transaction through the Dubai branch of its subsidiary FWU Dubai Services GmbH. The ultimate financiers were GCC-based investors represented.
The sukuk were issued through a Luxembourg SPV incorporated using a Dutch Stichting (foundation) structure - first used in connection with the quasi-sovereign sukuk issuance by Saxony-Anhalt in 2005.
Given its historic nature, Zawya interviewed Dr. Manfred Dirrheimer, FWU's chief executive, to get insight into the rationale and potential impact of the sukuk issue. Excerpts from the interview:
What prompted FWU to issue a sukuk?
FWU has been looking for a Shariah-compliant means by which it can refinance its Shariah-compliant factoring business globally.
What impact do you think it will have on the European Islamic finance sector?
It is hard to determine the wider impact of the FWU sukuk at present, but it is noteworthy that it is the largest issuance by a European corporate to date and, whilst there has been one other sukuk issuance in Europe previously (USD 10 million by a UK issuer), the FWU sukuk is the first of any significant size. This is also the first ever sukuk to be backed by Intellectual Property rights.
The use of sukuk and other Shariah-compliant funding instruments allows a company such as FWU (or any other suitable European corporate) the opportunity to access funding from a new class of investor that may previously have been unavailable to it. In these uncertain economic times, where traditional sources and methods of funding are not as freely available or even as desirable as they once were, such diversity provides a welcome new avenue for funding.
Why did you decide on a US dollar issuance?
The issuance in dollar was intended to appeal to a broad range of investors and as such the decision on denomination was not driven by uncertainty. In the case of this sukuk, investors were identified in jurisdictions in the Middle East that use currencies that are pegged to the USD, which made a USD issuance more practical. In addition, as FWU expands its operations into new geographical areas (often ones with USD-pegged currencies), the US dollar is an ever-more useful currency of finance.
What is the tenor, rate of return and frequency of distribution?
The tenor of the Sukuk Al-Ijara is seven years, making the sukuk due in 2019. It pays 7% per annum, half-yearly in arrears. Amanie Advisors were the Shariah advisors; Vinson & Elkins acted as international counsel; Loyens Loeff as Luxembourg and tax counsel; and Rolfs Partner as financial advisor.
Can you elaborate on the underlying Shariah structure of the sukuk?
The sukuk is based on the Islamic principle of Ijara or sale and lease-back. The underlying assets are a proprietary computer software system and associated Intellectual Property rights developed in-house by the FWU Group and used by its bank distribution partners in connection with their combined takaful operations. The FWU group has the full proprietary rights to this system. This is also the first sukuk to be backed by Intellectual Property rights.
How will you deploy the proceeds from the sukuk?
As mentioned, the proceeds are to be used in the Shariah-compliant refinancing of the commissions factoring business of the FWU Group.
How are you selling the sukuk?
This was a private placement to a group of institutional treasury investors in the Middle East.
Zawya 2013
Interview with Dr. Manfred Dirrheimer, CEO of FWU Group
FWU Group, a Munich-based financial services company, recently issued a USD 55 million sukuk, the first ever by a German corporate entity and the largest ever from a European corporate. This is also the first sukuk to utilize a computer software program and intellectual property rights under an Ijara (sale and leaseback) structure.
FWU, which primarily offers global conventional and takaful (Islamic insurance) solutions through distribution arrangements in Europe, the Middle East, Pakistan and Malaysia, entered into the transaction through the Dubai branch of its subsidiary FWU Dubai Services GmbH. The ultimate financiers were GCC-based investors represented.
The sukuk were issued through a Luxembourg SPV incorporated using a Dutch Stichting (foundation) structure - first used in connection with the quasi-sovereign sukuk issuance by Saxony-Anhalt in 2005.
Given its historic nature, Zawya interviewed Dr. Manfred Dirrheimer, FWU's chief executive, to get insight into the rationale and potential impact of the sukuk issue. Excerpts from the interview:
What prompted FWU to issue a sukuk?
FWU has been looking for a Shariah-compliant means by which it can refinance its Shariah-compliant factoring business globally.
What impact do you think it will have on the European Islamic finance sector?
It is hard to determine the wider impact of the FWU sukuk at present, but it is noteworthy that it is the largest issuance by a European corporate to date and, whilst there has been one other sukuk issuance in Europe previously (USD 10 million by a UK issuer), the FWU sukuk is the first of any significant size. This is also the first ever sukuk to be backed by Intellectual Property rights.
The use of sukuk and other Shariah-compliant funding instruments allows a company such as FWU (or any other suitable European corporate) the opportunity to access funding from a new class of investor that may previously have been unavailable to it. In these uncertain economic times, where traditional sources and methods of funding are not as freely available or even as desirable as they once were, such diversity provides a welcome new avenue for funding.
Why did you decide on a US dollar issuance?
The issuance in dollar was intended to appeal to a broad range of investors and as such the decision on denomination was not driven by uncertainty. In the case of this sukuk, investors were identified in jurisdictions in the Middle East that use currencies that are pegged to the USD, which made a USD issuance more practical. In addition, as FWU expands its operations into new geographical areas (often ones with USD-pegged currencies), the US dollar is an ever-more useful currency of finance.
What is the tenor, rate of return and frequency of distribution?
The tenor of the Sukuk Al-Ijara is seven years, making the sukuk due in 2019. It pays 7% per annum, half-yearly in arrears. Amanie Advisors were the Shariah advisors; Vinson & Elkins acted as international counsel; Loyens Loeff as Luxembourg and tax counsel; and Rolfs Partner as financial advisor.
Can you elaborate on the underlying Shariah structure of the sukuk?
The sukuk is based on the Islamic principle of Ijara or sale and lease-back. The underlying assets are a proprietary computer software system and associated Intellectual Property rights developed in-house by the FWU Group and used by its bank distribution partners in connection with their combined takaful operations. The FWU group has the full proprietary rights to this system. This is also the first sukuk to be backed by Intellectual Property rights.
How will you deploy the proceeds from the sukuk?
As mentioned, the proceeds are to be used in the Shariah-compliant refinancing of the commissions factoring business of the FWU Group.
How are you selling the sukuk?
This was a private placement to a group of institutional treasury investors in the Middle East.
Zawya 2013
