US firm King & Spalding has worked on a Shari’ah-compliant refinancing of a Hungarian shopping and entertainment centre in a breakthrough deal for Islamic finance in Central and Eastern Europe (CEE).

The instruction was for a Luxembourg-based real estate fund advised by Pramerica Real Estate Investors. The refinancing centred on a €16.3m package that was structured on an Ijara-wa-iqtin, or lease-to-own, premise with a complex split structure due to the main tenant having already entered into a long-term lease.

Although modest in size the deal is the first-ever Shariah-compliant Ijara-wa-iqtina to be implemented in Hungary and one of the first ones across the CEE region. Hypo Investmentbank was the mandated lead arranger.

King & Spalding turned to Dubai-based Islamic finance expert Jawad Ali (pictured) to handle the mandate. He commented: “In addition to its Shari’ah-compliant structure, the Pramerica transaction also posed challenges arising from its split structure and Hungarian law, which we overcame with innovative solutions.”