A unit of General Electric Co raised $500 million in a 5-year Islamic bond sale, the first by a large U. S. conglomerate, as it looks to diversify its investor base.

In July, GE and Mubadala Development Co, a state-owned investment holding company based in Abu Dhabi, established an $8 billion commercial finance joint venture for investments primarily in the Middle East and Africa.

We do the largest corporate issues of conventional debt and we have about $7 billion revenues in the Middle East and our presence here continues to grow ... that's one of the reasons and also to diversify our funding base, Satyen Shah, managing director for strategy and business development at GE Capital told Reuters on Thursday.

The sukuk was priced at 3-year fixed coupon of 3.87 percent and the spreads are 175 bps over 5-yr US treasuries, Shah said.

The global Islamic bond market has been lying idle for much of 2009, after issuance was hit last year by the global credit crunch and a debate over the compliance of some of its structures with Islamic law.

Several sovereigns, including Gulf Arab state Bahrain and Indonesia, have issued sukuk in recent months.

Issuance fell 56 percent to $14.9 billion in 2008, according to Standard & Poor's, but interest for high-rated emerging market debt has seen a flurry of conventional and Islamic bond issues in the third quarter of the year.

Bankers say GE Capital, the financial services arm of General Electric, aims to diversify its investor base to incorporate Islamic investors.

GE said that more sukuk issues could follow.

We intend to be regular issuers in the sukuk market and are heartened by the support we have seen in this first transaction, Kathy Cassidy, GE Senior Vice President and Treasurer Kathy Cassidy said in a statement.

Goldman Sachs, Citi, Kuwait's Liquidity House - a subsidiary of Islamic lender Kuwait Finance House - and National Bank of Abu Dhabi were joint bookrunners for the sukuk issue.

Abu Dhabi government-owned investment company Mubadala said on November 9 its commercial finance joint venture with General Electric was aiming for at least $4 billion in business next year.

(Editing by John Irish and Elaine Hardcastle)

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