Published: November 24, 2020
Etihad Airways lands first ever transition Sukuk
On October 29, Etihad announced that the firm became the first to use a transition structure in the Sukuk market. Transition bonds and Sukuk tie a range of agreed environmental, social and governance (ESG) metrics to the coupon, or profit rate for Sukuk. Etihad’s five-year Sukuk printed at 200bp over mid-swaps right.
In Etihad’s case, if it does not hit agreed key performance indicators (KPI), it will add 25bp to its final profit rate when the Sukuk matures.
“Many industries, including airlines, need to undertake complex and gradual transformations to reduce their carbon emissions, and the financial sector has a responsibility to help them,” said Ali Taufeeq, director for Middle East DCM at HSBC, one of the Sukuk bookrunners alongside Standard Chartered. “The transition Sukuk issuance by Etihad was a natural step in this direction and we are pleased to assist them in accelerating investment in more environmentally friendly solutions.”