Michigan-based University Bank, a unit of University Bancorp (UNIB), is planning a debut sale of Islamic bonds (sukuk), a rare sharia-compliant deal in the United States, according to the law firm advising on the transaction.
The community bank will sell an undisclosed amount of perpetual sukuk to raise its Tier 1 capital, paying a maximum annual profit rate of 5.75%, law firm Linklaters said in a statement late on Monday.
University Bank specializes in Islamic finance, including sharia-compliant mortgages, which follows religious principles such as a ban on gambling and outright monetary speculation.
The sukuk would be governed under the laws of New York state, the statement said. This contrasts with previous sukuk issued by U.S. entities, which have opted for offshore domiciles.
In 2006, Texas-based energy firm East Cameron issued a $165.67 million sukuk through a Cayman Islands vehicle.
GE Capital, the finance arm of General Electric, tapped the market in 2009 with a $500 million sukuk domiciled in Bermuda to fund a lease-based aviation deal.