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Product cover image for Emirates Airline: A Billion-dollar Sukuk-Bond Issue

Emirates Airline: A Billion-dollar Sukuk-Bond Issue

Emir Hrnjic; Harun Kapetanovic; David Reeb

Product #:9B14N002
Supplier:Ivey/NUS
Discipline:Finance, International Business
Setting:United Arab Emirates, 2013
Details:Case (PDF) • 19 pages • 2014-04-08 (Rev: 2014-04-04)

Subjects:

BondsInvestment managementBusiness managementFinance and investingInternational business

Industries:

Transportation and distribution

Geography:

United Arab Emirates
Your Price:$9.71

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Emirates Airline (EA) needs to fund the purchase of 30 new A380 aircraft. On March 11, 2013, EA announced plans to issue US$1 billion of Islamic bonds (sukuk) and $750 million of regular bonds. These bonds arguably share similar risks and seniority even though the sukuk bonds sold with a lower implied yield. This difference in pricing for securities with similar default risks seems at odds with conventional finance thinking. Against this backdrop, the EA treasury department must decide on the appropriate funding for this next batch of A380 airplanes.

Learning Objectives

This case is designed for a course in corporate finance or financial management that covers funding investments or raising capital. Additionally, it can be used in courses on portfolio management or fixed income that involve bond pricing. Alternatively, the case could be used in a module on corporate strategy that focuses on strategic financing choices. The case facilitates discussions on Islamic finance and emerging markets (in particular, Dubai).
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Case Study: Emirates Airline: A Billion-dollar Sukuk-Bond Issue (English version) | Ivey Publishing