Friday, August 28, 2009

Islamic Development Bank sukuk, Nakheel update, BNM releases SPR1 on murabaha, Takaful in the U.S.

The descriptions of the Moody's Aaa rating given to the $1.5 billion sukuk provide some details about the way they are structured, a hybrid structure combining the investments made by the bank to governments and companies. The hybrid sukuk combines "ijara assets, murabaha contracts, istisna'a contracts and Islamic Development Bank investments in equity and sukuk certificates". The sukuk represent ownership of the pool of assets which are serviced by the Islamic Development Bank. Profits are paid during the term of the sukuk and the sukuk assets are repurchased upon maturity. One interesting part of the sukuk is that their profit payments appear to be fixed during the term of the sukuk and the SPV issuing the sukuk is given a noninterest-bearing line of credit with the Islamic Development Bank to make up any shortfall in periodic payments. Given the structure of the sukuk in which most of the assets are likely to be ijara, murabaha, istisna'a and sukuk, the profit payments should be relatively predictable. The line of credit makes the sukuk equivalent to senior unsecured debt of the IsDB.

Two large holders of Nakheel's sukuk which matures in December 2009 belive that there will be no restructuring and that the sukuk will be repaid in full upon maturity. Meanwhile Nakheel is apparently selling liquid assets at a steep discount to raise cash to repay the sukuk. The National reports that Nakheel has sold its stake in Australia's Mirvac for 80% less than it paid in 2007.

Bank Negara Malaysia, the Malaysian central bank, released its guidance on the Shari'ah-compliance requirements for murabaha (Shariah Parameter Reference 1) to encourage standardization and is working on similar SPRs for ijara, mudaraba, musharaka, istisna'a and wadi'ah.

Takaful is now available in the U.S. from a subsidiary of now-government-owned AIG that is available through exclusive broker Zayan Takaful. So far the takaful is available in 13 states although only a few hundred people have signed up. The article also has an interesting discussion about differences in opinion about the need for takaful and the acceptability of it in its current form.

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