Post on 02-May-2018
RECENT DEVELOPMENTS IN SUKUK STRUCTURING
Sukuk innovation goes unabated
World Bank - IstanbulMay 2012
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STAN
DA
RDSU
KUK
STRUCTU
RE
STANDARD SUKUK STRUCTURESukuk are always asset-based, sometimes asset-backed
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THE SUKUK MARKETBack on track
TH
EM
ARKET
FOR
SUKU
K
TA
BLEO
FCO
NTEN
TS
PROJECT SUKUK
SOVEREIGN SUKUK
SUKUK AND SECURITIZATION
MUTUALIZATION: MULTI-ISSUER SUKUK
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12
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TABLE OF CONTENTS
THE FUTURE: LBO SUKUK & SUKUK PLATFORMS 13
FRENCH PARTICIPATION SUKUK 11
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PROJECT FINANCE SUKUKBuild bridges with Shari'ah-Compliant Funds
SU
KUK
AN
DM
UTU
ELFU
ND
S
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Sukuk are backed by the cash flows from the underlying infrastructure project.
Consequently, the sorts of constraints attached to Islamic law are by definition almost all alleviated.
Economically, legally, and Islamically, infrastructure sukuk are really powerful.
Analytically, rating agencies use a methodology that is the combination of a corporate approach and a structured finance approach.
Technically, such structures are flexible enough to adapt to investors’ appetite.
Finally, tactically, one can imagine external credit enhancement mechanisms (in the form of un-consolidating guarantees)
INFRASTRUCTURE PROJECT SUKUKThe way forward for Public-Private Partnerships
TH
EM
ARKET
FOR
SUKU
K
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PROJECT
SUKU
KSTRU
CTURE
PROJECT SUKUK STRUCTUREAsset based, with a Corporate Guarantee
Ass
ets Equity
Bank Debt
Sukuk
ASSETCO
OpCO
Fees
BANKS
AssetCo Project Finance funding cost
SPV
AssetCofunding
cost
Yourfunding
cost
Corporate
SUKUKHOLDERS
WITH or WITHOUTShari’ah-compliant
guarantee
E.S
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PROJECT
SUKU
KSTRU
CTURE
SOVEREIGN SUKUKInvestment-Grade Issuers Vs. Non-Investment Grade Issuers
Sales & Lease-Back
(Ijara) Structure
Investment-Grade Issuers> BBB-
Non-Investment-Grade Issuers
< BBB-
« COVEREDSUKUK »*
COVERED SUKUK: a sukuk issuance by a low-rated issuer, collateralized by a pool of liquid and high-rated assets, in order to achieve better (investment-grade) ratings, and thus lower funding costs.
SeniorUnsecured
Senior Secured
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SUKUK AND SECURITIZATIONIslamic Commercial & Residential Mortgage-backed Securities
ISLAM
ICCM
BS / RMBS
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SUKUK AND RISK MUTUALIZATIONIILM is the perfect example for the public sectorThe private sector could operate the same way (SMEs, local governments)
ISUKU
KA
ND
RISKM
UTU
ALIZATIO
N
IILM
Sovereigns < AAAAAA
Sukuk
Supplies assets
Issues
Receives $
Refinances in $, at the rate of
AAA
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PARTICIPATION SUKUKThe French example: « green finance » for « green energy »
GREEN
FINA
NCE
FOR
GREEN
ENERG
YIN
FRAN
CE
ParticipativeCompany (SEP)
Investors
Green EnergyAssets (Solar Farms)
Green EnergyCompanies
ErDF
Invest
Buys assets for €
Leased assets for €
kW €
Rental payments
Extremely simple; brings 7% net rental returns; open to individual investors; focuses on the real economy; is environment-friendly
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INDUSTRIALIZING SUKUK ISSUANCESThe future: Designing a Sukuk Platform
IND
USTRIA
LIZING
SUKU
K
INVESTORS
13
MORE ACTIVE USE OF LEVERAGEThe future: Shari'ah-Compliant LBOs
ISLAM
ICLEVERAG
EDBU
Y-OU
TS