JEDDAH, 25 March 2004 — Hanco, the Jeddah-based car leasing and rental company, will today sign an SR102 million Islamic finance deal in Beirut that sells investors its entire stock of vehicles. The Beirut-based BSEC Investment Bank arranged and structured the deal. Bahrain’s Shamil Bank is the underwriter. The Beirut signing will be attended by Lebanese Prime Minister Rafik Hariri and prominent Islamic banker Saleh Kamel, chairman of Dallah.
Caravan I is the first deal of its kind in the Gulf using a vehicle fleet as security. It is also the first time that such a securitization transaction has been undertaken as a Shariah-compliant product. The Sukuk has been approved by Islamic financial specialist, Dr. Yusuf Talal DeLorenzo, on behalf of Yasaar, the Shariah advisory company in London.
Backed by vehicles and lease agreements purchased from Hanco, the Sukuk essentially involves Hanco’s selling them to Shamil Bank which will then offer a stake to investors. Hanco will act as manager for investors, receiving in addition to the payment, a management fee for the operation and maintenance of the fleet, the collection of rental income and the disposal of vehicles.
In 2001, Hanco transformed itself from being a car hire company into what it calls a “transport solutions” company, catering to major companies in the Kingdom such as DHL, BAE and Binzagr Lever. Hanco has effectively become their “transportation department”, according to Hani Talib, the company’s CEO. It provides 20 different transportation products to companies including insurance, replacement vehicles, drivers, even fuel. According to Talib, it also addresses client’s specific needs. “For a machinery distribution company we were able to build into the vehicles mini-spare parts storage capabilities which saved the client 30 percent in costs in maintenance and fuel cost,” he said.
A second Sukuk deal - Caravan II - will be issued in eight month’s time when Hanco acquires a further fleet of vehicles. The Shariah-compliant securitization deal is seen as further evidence of a rapidly expanding Islamic banking sector which is in constant search for new product structures. Nizar Al Shubaily, head of Investment Banking at Shamil Bank, said: “We are excited to bring to the market such an innovative structure. Thanks to our partnership with BSEC, we are able to offer the Islamic banking sector a new Shariah compliant, groundbreaking investment product. Caravan I Sukuk is part of Shamil Bank’s focus on catering to the region’s rising demand for Islamic investment products and a stepping stone in promoting the bank as an innovator in the field of Islamic banking. With its current team in place, Shamil is eager to execute Shariah compliant deals that rely on sound financial grounds and creative structures to bring closer the investor community and the corporate arena in the GCC region.”
— With additional input from Saad Siddiqui