Asian Finance may halve size of its aviation fund

Malaysian Islamic lender Asian Finance Bank may halve the size of its planned aviation fund to 500 million Malaysian ringgit (Dh508m) as the economic crisis takes its toll on investors' appetite for alternative assets, a top official said yesterday.

"We are currently working out a structure. It's still on track," Mohamed Azahari Kamil, the Chief Executive Officer of the bank, said after a signing ceremony.

"But maybe the size will be much smaller compared to what we intended to do earlier, 50 per cent down… We're looking at maybe 500 million ringgit," he said.

The bank said in October last year it will set up aviation and property funds of over 1.5 billion ringgit to capitalise on demand for alternative assets.

Since then global markets have been rocked by the financial storm following the collapse of Lehman Brothers and a rapid deterioration in the world economy.

The bank, which is backed by Middle Eastern investors, had planned a Gulf aviation fund that could be denominated in euros or dirhams.

"At this point in time, as you know, valuations have been very difficult, especially on aircraft, valuations have come down and generally the expectations of the yield of investors have been revised, so we need also to restructure the whole arrangement to ensure that when we do a fund, it will be something that is acceptable to the public," Azahari said.

He said the bank has been considering one or two buildings in Malaysia for an Islamic closed-end property fund, which it may subsequently convert into a real estate investment trust (REIT) once market sentiment improves.

Amid the global financial crisis, Asian Finance will focus on advising and financing Malaysian firms seeking opportunities in the Middle East, Azahari said.

With its key shareholder Qatar Islamic Bank, the bank can help Malaysian firms look for local partners, he added.

"Some of the areas that we are working on are infrastructure projects especially for developments of commercial office towers for selected corporates in Abu Dhabi as well as in Qatar," Azahari said.

"There are lots of opportunities in Abu Dhabi, in Qatar, especially for the oil and gas sector. And the economy is still robust," he said.

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