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Read the case Emirates Airline: A Billion-dollar Sukuk-Bond Issue By: Emir Hrnjic, Harun Kapetanovic, David Reeb , and write a 2-page report answering the following
Read the case "Emirates Airline: A Billion-dollar Sukuk-Bond Issue By: Emir Hrnjic, Harun Kapetanovic, David Reeb ," and write a 2-page report answering the following questions: Why is there a yield difference between the two issuances in these two different markets? Is this due to differences in risk, investor clientele, liquidity, seniority, or something else? For this question only, assume this price differential is due to differences in investor clientele. Does this provide an opportunity that hedge fund managers could exploit? If so, how exactly would they exploit this opportunity? If not, explain the market impediment or friction that prevents hedge fund managers from acting on these price differences. Why were six different banks involved in this issuance? For simplicity, assume that the banks equally split the issuance. Should the banks fees for their services differ between the sukuk bond and the straight bonds? If so, by how much and in which direction? The sukuk bond issued by EA is of the wakala variety (comparable to principal agent model), even though the largest block of sukuk bonds falls into the ijara category (sale and lease back). Why did the company choose this structure? Is it the right structure? Why or why not? How should EA finance its next batch of planes? What about the batch after that? Recommend a financing roadmap for EA for its existing orders of A380 planes. Make sure to consider the maturity choice of the firm as well
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