RAKIA Sukuk (continued...) - Islamic Finance News

Deals of the Year 2007 Handbook
NIG US$1.5 billion Sukuk (continued...)
A special purpose vehicle (SPV) was formed for and on
behalf of the investors which, from time to time, would issue
Sukuk certifi cates to investors. The SPV obtained funding
from investors pursuant to a program agreement and
master trust feed.
The SPV, acting on behalf of the Sukuk holders, and in its
capacity as the Rab al Maal, appointed NIG as the Mudarib
to invest the capital of the Mudarabah in accordance with
an agreed investment plan prepared by the Mudarib.
The SPV, as Rab al Maal, entered into a master Mudarabah
agreement with NIG wherein, from time to time, the SPV
would appoint NIG as the Mudarib to invest the proceeds
of each Sukuk issue under the program.
The master Mudarabah agreement governs the overall
relationship between the Rab al Maal and the Mudarib.
At the time of each Sukuk issue under the program, NIG, as
the Mudarib, would enter into a supplemental Mudarabah
agreement with the SPV, as Rab al Maal, on the basis of
the supplemental Mudarabah agreement annexed to the
master Mudarabah agreement.
“The Mudarib may commingle
the Mudarabah assets with
the assets of NIG, provided
the Mudarabah accounts
clearly distinguish between
the Mudarabah assets and the
assets owned by NIG”
The Mudarib shall distribute the profi t generated by
the Mudarabah to the Rab al Maal and the Mudarib
in accordance with the pre-agreed profi t-sharing
percentages as defi ned in the supplemental Mudarabah
agreement.
The SPV, in its capacity as the Rab al maal, shall apply
its share of the profi t generated by the Mudarabah to
distribute the profi t payments to the Sukuk holders.
NIG, in its corporate capacity and having evaluated the
anticipated return and commercial benefi t it will receive in
acquiring the Mudarabah assets, will execute a purchase
undertaking in favor of the SPV. The purchase undertaking
is neither a guarantee from NIG nor an undertaking to
purchase the Rab al Maal’s Mudarabah units in the
Mudarabah.
Under the purchase undertaking, NIG undertakes that
upon the SPV exercising its option to oblige NIG to
purchase all or, as applicable, the relevant proportion of
the SPV’s rights, benefi ts and entitlements in and to the
Mudarabah assets, NIG shall purchase the same, with
settlement in cash based on a pre-determined sale price,
on the relevant exercise date following the exercise of
purchase undertaking by the SPV.
On the closing date of each Sukuk issue under the program
(Sukuk issue date), the SPV, as Rab al Maal, would apply the
proceeds of the Sukuk as the capital of the Mudarabah,
constituted by the Rab al Maal and NIG as Mudarib. The
Mudarib would invest the capital of the Mudarabah in
accordance with an agreed investment plan, which will
provide that such capital be invested in Shariah compliant
activities, including investments in the Mudarib’s business
activities.
All of the assets of the Mudarabah, including all assets
acquired after, from or through the investment of such
capital shall be assets of the Mudarabah (the Mudarabah
assets). The Mudarib may commingle the Mudarabah assets
with the assets of NIG, provided the Mudarabah accounts
clearly distinguish between the Mudarabah assets and the
assets owned by NIG.
NIG, as obligor, would take reasonable steps to ensure
that, at any time, the value of the Mudarabah assets and
the profi t generated by those assets are quantifi able.
This case study was written
by Ahsan Ali, director of
Islamic Origination. He can be
contacted at +971 4508 3174
or via email at ahsan.k.ali@standardchartered.com
www.IslamicFinanceNews.com
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