Presentation ENG Case Studies on Sukuk Issuance - METAC

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Presentation ENG Case Studies on Sukuk Issuance - METAC

ong>Caseong> ong>Studiesong>

on Sukuk Issuance

Regional Workshop - Developing Government Securities

under Islamic Finance

Amman, Jordan

By Ayman H. Abdel Khaleq

24 September, 2012


Contents

• Sovereign Sukuk Issuance

‣ Dubai (Programme)

‣ Pakistan (Standalone)

• Quasi-Sovereign Sukuk Issuance

‣ Dubai World (Mudaraba)

‣ Nakheel (Equity Linked)

• Other Sovereign and Quasi-Sovereign Sukuk Issuances Earmarked

• Private Sukuk Issuance

‣ Durrat Khaleej Al-Bahrain (Istisna’a and Ijara)

‣ Al Thani (Musharaka)

© 2012 Vinson & Elkins LLP


Sovereign Sukuk Issuance


Department of Finance, Dubai

• Issue Date: 3 November 2009

Sukuk Size: US$2,500,000,000

Sukuk Structure: Ijara (Programme)

• Trust Assets: Dubai Airport Terminal Facilities

• Listing: Dubai Financial Market, London Stock Exchange

• Issuer/Trustee: Dubai DOF Sukuk Limited

• Obligor: Government of Dubai

• Managers: Dubai Islamic Bank, Mitsubishi UFJ Securities

International, Standard Chartered Bank and UBS

Investment Bank

• Tenor: 5 years

• Pricing: 6.39% per annum

• Date of Distribution: 3 May and 3 November each year

© 2012 Vinson & Elkins LLP


Department of Finance, Dubai - Continued

• Maturity Date: 3 November 2014

• Governing Law: English Law and UAE Law

• Shari’a Advisor: Shari’a advisory boards of Dubai Islamic Bank and Standard Chartered

Bank

• Use of Sukuk proceeds: Fund the development of Dubai Airport Terminal Facilities

• Distinguishing Factor: Largest Islamic bond sale in the GCC for 2009

• Transaction Documents: Offering Circular

Master Trust Deed

Master Purchase Agreement

Master Lease Agreement

Master Servicing Agreement

Master Purchase Undertaking

Master Sale Undertaking

Master Substitution Undertaking

Master Agency Agreement

Master Costs Undertaking

© 2012 Vinson & Elkins LLP


Department of Finance, Dubai - Continued

Dubai Government

as Seller

Dubai Government

as Lessee

Dubai Government

as Obligor

Dubai Government

as Servicing Agent

Sale of

Assets

Purchase

Price

(of Assets)

Ijara (Lease

of Assets)

Rentals

Sale

of Assets

Dubai DOF Sukuk Limited

as Issuer and Trustee

Exercise

Price

Appointment

as Servicing Agent

Reimbursement of

Servicing Costs

(set-off against

Supplemental Rental)

Substitution

Sukuk

(Trust

Certificates

Cash

Periodic

Distribution

Amounts

Dissolution

Amount

Dubai Government

as Seller

Investors

© 2012 Vinson & Elkins LLP


Islamic Republic of Pakistan

• Issue Date: 27 January 2005

Sukuk Size: US$600,000,000

Sukuk Structure: Ijara (Standalone)

• Trust Assets: Lahore-Islamabad Motorway Highway Land

• Issue Rating: B+ (S&P) at Issue Date

• Listing: Luxembourg Stock Exchange

• Issuer/Trustee: Pakistan International Sukuk Company Limited

• Managers: Citigroup and HSBC Bank (as Lead Manager), ABC Islamic Bank, Arab

Bank, Dubai Islamic Bank, Habib Bank AG Zurich and National Bank of

Pakistan (as Co-Lead Managers) and Meezan Bank (as Arranger)

• Guarantor: The Islamic Republic of Pakistan

• Tenor: 5 years

• Pricing: 6 months LIBOR + 220 bps

• Date of Distribution: 27th day of January and July each year

© 2012 Vinson & Elkins LLP


Islamic Republic of Pakistan - Continued

• Maturity Date: 27 January 2010

• Use of Sukuk proceeds: Fund the purchase price for the Lahore-Islamabad Motorway

Highway Land

• Distinguishing Factors: True sale of the Lahore-Islamabad Motorway Highway Land

• Transactions Documents: Offering Circular

Trust Deed

Purchase Agreement

Lease Agreement

Servicing Agreement

Purchase Undertaking

Sale Undertaking

Agency Agreement

Costs Undertaking

© 2012 Vinson & Elkins LLP


Islamic Republic of Pakistan - Continued

Pakistan as

Seller and Obligor

Land

Exercise

Price

Ijara (Lease)

Rental

Pakistan International Sukuk

Company Limited

as Issuer and Trustee

Land

Purchase

Price

National Highway

Authority

Distributions

(Periodic

and Final)

Sukuk

Certificate

Cash

Contribution

Investors

© 2012 Vinson & Elkins LLP


Quasi-Sovereign Sukuk Issuance


DP World

• Issue Date: 3 July 2007

Sukuk Size: US$1,500,000,000

Sukuk Structure: Mudaraba

• Trust Assets: Mudareb to be invest in Terminal 2 at Jebel Ali Free Zone

• Issue Rating: A+ (S&P) A1 (Moody’s) at Issue Date

• Listing: Nasdaq Dubai, London Stock Exchange

• Managers: Barclays Capital, Citibank, Deutsche Bank and Dubai Islamic

Bank

• Issuer/Trustee: DP World Sukuk Limited

• Obligor: DP World Limited

• Tenor: 10 years

• Pricing: 6.25%

• Date of Distribution: 2 of July and January of each year

© 2012 Vinson & Elkins LLP


DP World - Continued

• Maturity Date: 2 July 2017

• Governing Law: English Law

• Shari’a Advisor: Shari’a advisory board of Dubai Islamic Bank

• Use of Sukuk proceeds: The initial investment by the Mudareb would be in Terminal 2,

a second terminal adjacent to the current Jebel Ali Terminal

• Distinguishing Factors: First UAE corporate rated sukuk offered into the U.S. and only

the second Rule 144A sukuk offered

• Transaction Documents: Offering Circular

Trust Deed

Mudaraba Agreement

Purchase Undertaking

Sale Undertaking

Agency Agreement

Costs Undertaking

© 2012 Vinson & Elkins LLP


DP World – Continued

DP World Limited

as Mudareb

Mudaraba

Agreement

DP World

Limited

as Obligor

Purchase and

Sale

Undertaking

Exercise Price

DP World Sukuk

Limited

as Issuer and Trustee

Declaration

of Trust

Periodic Distribution

Amounts and Dissolution

Distribution Amounts

Investors

© 2012 Vinson & Elkins LLP


Nakheel

• Issue Date: 14 December 2006

Sukuk Size: US$3,520,000,000

Sukuk Structure: Ijara (Equity Linked)

• Trust Assets: Land, buildings and other property at Dubai Waterfront

• Listing: Nasdaq Dubai

• Managers: Barclays Capital and Dubai Islamic Bank

• Issuer/Trustee: Nakheel Development Limited

• Obligor/Guarantor: Nakheel (as Obligor) Dubai World (as Guarantor)

• Tenor: 3 years

• Pricing: 6.345%

• Date of Distribution: 14 day of June and December each year

• Maturity Date: 14 December 2009

© 2012 Vinson & Elkins LLP


Nakheel - Continued

• Governing Law: English Law and UAE Law

• Shari’a Advisor: Shari’a advisory board of Dubai Islamic Bank

• Use of Sukuk proceeds: Fund the development of a number of projects including

Jebel Ali Village, Jumeriah Islands, Dubai Promenade, the

Lost City, Jumeirah Park and Jumeirah Village, Dubai

Waterfront and International City

• Distinguishing Factors: Second convertible note offering (first being Ports Customs

& Free Zone Corporation)

• Transaction Documents: Offering Circular

© 2012 Vinson & Elkins LLP

Trust Deed

Purchase Agreement

Lease Agreement

Purchase Undertaking

Sale Undertaking

Guarantees

Security – Share Pledge and Real Property Mortgage

Subscription Rights Sale Undertaking

Agency Agreement

Costs Undertaking


Nakheel - Continued

Nakheel Holdings 2

as PQO Obligor

Nakheel Holdings 1

as Seller

Nakheel Holdings 2

as Obligor

Sale of long

Leasehold

Process

QPO Shares

Subscription Rights Sale Undertaking

QPO Subscription

Moneys

Sale of long Leasehold

Relevant Exercise Price

Purchase Undertaking

Dubai World

Dubai Word

Guarantee

Nakheel Holdings 2

as Lessee

Rental

Lease

Nakheel Development

Limited

as Issuer

Co-Obligor Guarantee

Nakheel Holdings 1,

Nakheel Holdings 2,

Nakheel Holding 3

Declaration of Trust

Share Pledges

and Mortgages

QPO

Shares

QPO

Subscription

Moneys

Sukuk

Proceeds

Periodic Distribution Amounts,

Final Distribution Amounts

Additional Distribution Amounts

Sukuk issue Amount

Nakheel

Holdings 1

© 2012 Vinson & Elkins LLP

Investors


Other Sovereign and Quasi-

Sovereign Sukuk Issuances

Earmarked


Other Sovereign and Quasi-Sovereign Sukuk

Issuances Earmarked

• Western economies –

• United Kingdom – The UK has introduced legislation to prevent the double

taxation of assets taking place under an Ijara and has proposed new regulations

to support Islamic finance and the issuance of a corporate sukuk within the UK

• France – The French government is rumored to be considering a sovereign sukuk

issuance, which will be the first of its kind in France

• Japan - The Japan Bank for International Cooperation is planning a 7 year tenor

sukuk targeting GCC investors with a value of between US$150,000,000 to

US$200,000,000

• South Korea – The finance ministry had proposed a revision to the tax code with

the aim of treating sukuk as bonds so that South Korean issuers could receive the

same tax advantage as those applied to conventional bond issuers

© 2012 Vinson & Elkins LLP


Other Sovereign and Quasi-Sovereign Sukuk

Issuances Earmarked - Continued

• Emerging economies –

• Indonesia – Indonesia has announced a US$1,000,000,000 sovereign

sukuk which is expected to pay a yield of 5.125%

• Malaysia - Malaysia’s Tenaga Nasional Bhd may issue a sukuk of up to

US$1,500,000,000 in 2011 in order to raise funds to build 2 new power

plants

• Saudi Arabia – The Saudi General Authority of Civil Aviation is rumored

to be considering SAR 4,500,000,000 sukuk to finance part of a new

terminal at Jeddah airport

• Philippines – The Philippines government has announced plans to issue

a US$1,000,000,000 sovereign sukuk which will be the first issuance of

its kind in the Philippines. The Philippines does not currently have a

regulatory framework in place for Islamic banking

© 2012 Vinson & Elkins LLP


Private Sukuk Issuance


Durrat Khaleej Al-Bahrain

• Issuer: Durrat Sukuk Company B.S.C.(c)

• Issue Date: 25 January 2005

Sukuk Size: US$120,000,000

Sukuk Structure: Istisna’a and Ijara

• Trust Assets: The Durrat Project

• Managers: Kuwait Finance House and Liquidity Management Centre

• Listing: Bahrain Stock Exchange

• Issuer/Trustee: Durrat Sukuk Company B.S.C.(c)

• Obligor: Durrat Al Bahrain

• Tenor: 5 years

• Pricing: 3 months LIBOR + 125 bps

• Distribution: 25 day of January, April, July and October each year

© 2012 Vinson & Elkins LLP


Durrat Khaleej Al-Bahrain - Continued

• Maturity Date: 2009

• Governing Law: English Law

• Shari’a Advisor: The Shari’a Supervisory Board of Kuwait Finance House

• Use of Sukuk proceeds: Fund the construction of the first phase of the US$1 billion

Durrat Al-Bahrain Project

• Transaction Documents: Offering Circular

Master Istisna’a Agreement

Master Ijara Agreement

Master Service Agency Agreement

Project Manager Appointment Agency Agreement

Investment Agency Agreement

Subscription Agreement

Deed of Security

Agency Agreement

Costs Undertaking

© 2012 Vinson & Elkins LLP


Durrat Khaleej Al-Bahrain - Continued

Customers

Sale Proceeds

Retail

Sales

Durrat Khaleej Al Bahrain Company

B.S.C. (c)

as Project Company

A

B

C

D

E

Durrat Sukuk Company B.S.C. (c)

as Issuer

Sukuk

Sukuk

Proceeds

Investors

Reclaimed Land

and Infrastructure

Master Istisna’a

Agreement

Contractors

A – Licence, B – Security over Property, C – Lease of Base Infrastructure

D – Ijarah Payments, E – Delivery of Reclaimed Land and Base Infrastructure

© 2012 Vinson & Elkins LLP


Al Thani

• Issue Date: 3 October 2007

Sukuk Size: US$100,000,000

Sukuk Structure: Musharaka

• Trust Assets: Al Bustan Centre and Dubai Wholesale Plaza

• Managers: Dubai Islamic Bank (as Lead Manager), Bahrain Islamic

Bank and Khaleeji Commercial Bank (as Co-Lead

Managers) and Emirates Islamic Bank and Liquidity

Management Centre (as Arrangers)

• Issuer/Trustee: Thani Investments Sukuk Company Limited

• Obligor: Thani Investments LLC

• Tenor: 5 years

• Pricing: 6 months LIBOR + 250bps

• Distribution: 3 April and 3 October each year

• Maturity Date: October 2012

© 2012 Vinson & Elkins LLP


Al Thani - Continued

• Governing Law: English Law and UAE Law

• Shari’a Advisor: Shari’a Supervisory Board of Liquidity Management Centre

• Use of Sukuk proceeds: Refinance existing debt and to enhance its real estate

and property development division

• Transaction Documents: Offering Circular

Trust Deed

Musharaka Agreement

Management Agreement

Purchase Undertaking

Sale Undertaking

Security – Real Property Mortgages

Agency Agreement

Costs Undertaking

© 2012 Vinson & Elkins LLP


Al Thani - Continued

Musharaka

Operating Account

Periodic Distribution Amounts

Dissolution Distribution Amounts

Investors

Musharaka

Revenues

Sukuk

Subscription

Proceed

Trust

Certificates

Thani Investments

LLC

as Obligor

In-Kind

contribution to the

Musharaka Capital

Management Agreement

Musharaka

Thani Investments Sukuk

Company Limited

as Issuer and Trustee

Sukuk Proceeds

contribution to the

Musharaka Capital

Real Estate

and

Property Development

© 2012 Vinson & Elkins LLP


Questions

As legal advice must be tailored to the specific circumstances of each case,

nothing provided herein should be used as a substitute for advice of

competent counsel. The materials in this presentation do not constitute legal

advice, do not necessarily reflect the opinions of Vinson & Elkins L.L.P. or

any of its attorneys or clients, and are not guaranteed to be correct,

complete, or up-to-date.

© 2012 Vinson & Elkins LLP

Europe 294812

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