Allen & Overy has advised on three debut Islamic bond issues from non-Islamic sovereigns in as many weeks, following a spate of activity in the sukuk market. Luxembourg is the latest to bring a Shariah-compliant bond offering to the market in the first euro-denominated sukuk of its kind, and follows those of Hong Kong and South Africa.

Luxembourg-based capital markets partner Frank Mausen commented: “As only the fourth sovereign sukuk from a non-Islamic country and the first Euro denominated sukuk, this is a very significant transaction. It is an exciting time for the Islamic finance industry, the sukuk market is very active with Dealogic figures highlighting that more shariah-compliant bonds have priced globally so far this year than in all of 2013.”

London-based capital markets partner Jamie Durham noted: “Luxembourg was one of the first centres for the listing of sukuk and this transaction represents another very significant demonstration of the country’s commitment to the Islamic finance industry and sukuk, in particular. This is also another example of the large and growing appetite for Islamic bond issuance. We believe there is still huge further potential for the global sukuk market as different entities see the value in strengthening their Islamic finance presence.”

Allen & Overy advised the Luxembourg Government in connection with the sukuk offering. BNP Paribas and HSBC acted as joint lead managers and Banque Internationale à Luxembourg S.A. and QInvest LLC acted as co-managers on the transaction.

The AAA/Aaa rated five-year trust certificates (rated by Standard & Poor’s and Moody’s, respectively) will be used by Luxembourg Treasury Securities SA for the acquisition of real estate assets from the State of the Grand Duchy of Luxembourg. The certificates were offered to institutional investors internationally and the sukuk is listed on the Luxembourg Stock Exchange and will be traded on the Euro MTF Market.

The Allen & Overy team was led by capital markets partners Frank Mausen (Luxembourg) and Jamie Durham (London) together with tax partner Patrick Mischo (Luxembourg), assisted by Serge Hoffmann (counsel, Luxembourg), Paul Péporté (counsel, Luxembourg), Evelina Palgan (senior associate, Luxembourg), Julie Carbiener (senior associate, Luxembourg), Cieren Leigh (senior associate, London) and Victoria Elinson (associate, London).