Emirates Airline: A billion-Dollar Sukuk-bond issue Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Emirates Airline: A billion-Dollar Sukuk-bond issue Case Solution

Difference between the yields of two issuances in two different markets

As the case discusses difference between two bonds within a particular market and shows that each bond has various features involved within the duration of the maturity. The comparison between these two identified the risks and return associated within each category, each bond consists of different risk and other factors that contribute to decreasing the size and yield of the particular bond.

Global Financial Crisis

With the sudden global financial crisis,it is identified that the capital markets declined with a certain amount of ratio and thus tightened the refinancing activities of debt as well as restricted the additional debt level over the use of the industrial development. The impact also hurt the UAE bond market and decreased the worth and size of particular bonds within selected years.

If analysing the demand of two issuance of bonds,it can be then observed that the market of Sukuk is far greater than regular bonds. This shows that United Arab Emirates has the more power to trade the Sukuk bonds instead of regular bonds. So in other parts of Middle East, the Islamic finance also increases its trade facilities over the use of such kinds of bonds.

Differences in the nature of bonds

The sudden differences in the yield of these two bonds has various reasons, first the Islamic finance is not subject to interest or coupon rate as compared to the regular bonds. Sukuk shows the ownership of the particular asset, whereas the regular bond is only subjected to the obligation.

The assets under the Sukukare based on the Shariah compliant structure, whereas the regular bonds consist of the traditional structure under the interest obligations. Sukuk are determined by their prices through the value of a particular assets, whereas the traditional bonds are determined through the credit ratings issued by the credit rating agency.

The profits under the Sukuk are based on the term of profit and loss share, whereas the fixed income is granted in the traditional bonds. The selling of the Islamic bonds shows that the ownership would also transfer when the Sukuk holder would sell the share. Whereas the selling of regular bond is subject to the sale of debt under the obligation.

The Islamic bonds are also shown in the form of the tangible asset rather than by the debt, this shows that the particular asset has avalue of holding in the particular period of time. It also shows that the issue of bonds is not like issue of Sukuk but the Islamic bond would be purchased instead of issue for the certain reason of refinancing,this shows that the bond is like the property of the investor and has the security to hold for the particular time period.

In the case of the regular bonds, the bond holder acts as the loan provider to receive the fixed interest in the form of receipt from the loan provider, who issue the bonds to finance for the business.

The yield ratio shows that Islamic bonds have a lower yield than the regular bonds because they have a term of profit and loss account, where the investor would sometimes be under e loss due to the condition of the operations of the company. Whereas the yield of the regular bonds are high, due to the reason of fixed interest rates received from the bond holder within a certain period of time..................

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Emirates Airline: A billion-Dollar Sukuk-bond issue Harvard Case Solution & Analysis