International Innovative Technologies, a maker of industrial milling machines in northeast England, has raised $10 million through a private-equity-style sukuk to help develop new products, its legal adviser, Norton Rose, told Reuters.
The sukuk is using a so-called musharaka structure, also known as profit and loss sharing, allowing Millennium an option to take a stake in IIT.
"There is absolutely no reason (why) other corporates and government entities cannot follow suit," said Farmida Bi, the Norton Rose partner who worked on the transaction.
"They (IIT) found an investor which could only invest in a Sharia-compliant way, hence the structure. This is important. Many Islamic investors are looking at potential investments, particularly in the high-tech sector," she said.
Sukuk are generally certificates of ownership of either an asset or a project, or as in the IIT case, a business venture.
In musharaka, parties contribute capital to a venture with profits to be shared in an agreed ratio, while losses are generally divided in line with capital contributions.
Before the credit crisis, Islamic finance had been touted as a more reliable source of capital for companies because of its use of tangible assets, but the sector suffered a dent in the wake of the Dubai debt crisis.
Britain is viewed as the most advanced Islamic finance centre in Europe, having changed its legislative and tax frameworks to accommodate the tenets of Islamic law.
It has hosted sukuk listings for foreign issuers, but until now neither a government or a European company has sought to tap Islamic investors.
The first half of 2010 saw worldwide sukuk issuance top $13.7 billion, nearly double the amount recorded in the first half of 2009, according to S&P.