Product details

Equate Petrochemical Co (Equate) is a joint venture between Union Carbide Corp and Petrochemical Industries Co (PIC) for the construction of a $2 billion petrochemical plant in Kuwait. The sponsors began construction in August 1994 using a bridge loan and are in search of permanent, non-recourse finance. As part of the permanent financing, the sponsors want to use a tranche of Islamic finance - funds that are invested in accordance with Islamic religious principles known as Sharia. The sponsors hired Kuwait Finance House which, in turn, approached The International Investor (TII is a Kuwaiti investment bank) to assist in structuring and underwriting the Islamic tranche. The case is set in early December 1995, as members of The Institutional Investor's Structured Finance Group are deciding which Islamic structure to use, how to resolve various conflicts between the Islamic and conventional tranches, and how large a commitment to make on behalf of their investors.