Rizwan Kanji Quoted in Islamic Finance News on Sukuk Payment Defaults

Akin Gump corporate partner Rizwan Kanji has been quoted in the Islamic Finance news article “Defaults driving due diligence?” The article reports on the latest default in the Islamic finance space, with Indonesia’s flag carrier, Garuda, missing its June Sukuk payment and now seeking to suspend its other debt payments.

While this most recent default was not a surprise, the article says, it does come shortly after another high-profile restructuring and was still a blow for the Sukuk market. Surprisingly, though, according to IFn, there has been a lack of sovereign support.

“The recent issues around Garuda’s Sukuk isn’t a reflection of the current Sukuk market as a whole,” stated Kanji. “Certain industry sectors have been greatly impacted by the pandemic and the aviation industry is a prime example of such an industry sector. However, we have read that plenty of global and regional airlines have been extended sovereign support, which helped.”

The article notes that there is currently a lot of liquidity in the market and Islamic banks are mostly flush with cash. While that means access to financing should not be difficult and there is little credit pressure on a broader basis, there are still some associated risks.

“There are a number of considerations I believe investors have to consider including the opportunity cost of any restructuring,” Kanji said. “There are a lot of new issuers coming to market right now, especially within industry sectors that have been resilient to the effects of the pandemic or have recovered from the pandemic, which provide investors better and perhaps safer opportunities compared to an industry sector that is still relatively uncertain in the short to midterm.”