Majid Al Sayed Bader Al-Refai was on the verge of signing up his placement agent, UBS, for the launch of a $375m share issue for Unicorn Investment Bank, when terrorists struck in the US on September 11, 2001. Plans for this innovative Islamic investment bank were put on hold and Mr al-Refai had to wait three more years for the launch of his institution.
In 2004, when he felt the environment had settled down enough to relaunch the share issue, UBS again acted as his placement agent, but on this occasion the bank’s initial capital was restricted to just $111m.
Unicorn is now in the process of catching up on this capital shortfall, with the launch of a plan to raise $248.2m. The fund raising will be staggered. The private placement will aim to attract both high-net-worth individuals and institutions and the bank aims to have an initial public offering in the Middle East in the first quarter of 2007.
Full-service bank
The limitation on capital has not changed Mr al-Refai’s strategy for the building of a full-service investment bank, encompassing asset management, private equity, capital markets, corporate management and real estate. Mr al-Refai, who was brought up in the US and attended an American university, pursues this Western model, but with an Islamic philosophy. He comes from a distinguished Kuwaiti family, but learnt his early banking in Saudi Arabia.
His role in bringing Islamic and Western financial cultures together is a source of particular pride. He says:
“I am proud to say I am maybe the first and only bank to be set up in the Middle East whose capital was raised by a Western main bank.”
Yet Mr al-Refai cannot disguise his frustration at the time it has taken to launch and build the bank. “In 2000 I prepared a business plan for a bank with $500m capital, and everyone thought I was a nut. A small bank in the West has capital of $100bn. So why do I have a problem making a bank with half a billion?”
Mr al-Refai’s dynamism in the area of Islamic finance cannot be disputed. Only in June, Unicorn announced a link-up with WestLB’s London branch for a five-year $150m Musharaka Trust sukuk for the Investment Dar Company (TID) of Kuwait. Unicorn says this is the first Musharaka sukuk structured with a put option for the investors and a call option for the issuer. The put option allows each certificate holder or investor to exit the transaction after the third year, while the call option allows the issuer the same flexibility at the same date.
The Islamic finance component is also critical to a joint venture with the Abu Dhabi Holding Company in a Bahrain Monetary Agency (BMA)-approved shariah-compliant real estate fund called Gulf Springs. Jacques Bernard, who heads Unicorn’s asset management division, says: “In terms of real estate, the Middle East and north Africa are one of the most dynamic regions in the world so great opportunities exist for disciplined and strategic real estate investments and developments.”
Regional player
Unicorn has also received BMA approval to launch a $150m shariah-compliant fund to target private equity investments globally. The bank, in conjunction with Standard Bank, recently completed a securitisation on behalf of Kingdom Installment Company of Saudi Arabia. Unicorn was lead manager, shariah adviser and joint bookrunner.
Mr al-Refai has set up joint ventures with banks in many parts of the Muslim world. But he remains hopeful that he can take the Islamic finance message out of the Middle East, and establish it in the West. “One of my true dreams is to set up an Islamic bank in London, and the US. We were part of a group of 20 banks invited to advise on building an Islamic banking code for America. Thank God, the Americans are coming around and copying what their English brothers started doing a long time ago.”
