Sukuk in default, Amlak and Tamweel resolved?, Islamic law firm

Malaysian ratings agency RAM Ratings Service has a very detailed overview of how sukuk function in cases of default comparing both the asset-based and asset-backed sukuk, as well as the differences between the Gulf and Malaysia. In asset-based sukuk, the asset is used to structure the transaction, but is not actually transferred to investors. The sukuk investors therefore become unsecured creditors of the issuer through a purchase undertaking that compels the issuer to repurchase the assets in cases of default. In asset-backed sukuk, the assets are sold to the SPV used to structure the transaction and the investors have recourse to this asset, which the sale to the SPV protects from the claims of the issuer's other creditors.

The problems at Amlak and Tamweel, two Dubai-based Islamic finance companies could be close to a resolution that sees them merged together into an Islamic bank that is partially government-owned. The two companies have not been providing any financing as their fate has been determined largely by the government of Dubai and the United Arab Emirates. The resolution proposed in some way resembles the conservatorship that was the end result of Freddie Mac and Fannie Mae in the U.S. with partial government ownership of the combined companies that would support the two companies' debt load.

An article provides greater detail about the workings of a Shari'ah-compliant law firm. In a time when law firms along with their financial clients are tightening it is interesting that there is a law firm that is beginning with a self-imposed limitation on the types of clients it will accept.

Other News

• The Investment Dar announces that it has appointed a Chief Restructuring Officer following the Standstill Agreement with its creditors.
  
• DIFC and the World Bank's Multilateral Investment Guarantee Agency are working together to develop the GCC's bond and sukuk markets. A more detailed summary of the issue is available from Emirates Business 24-7.
  
• Malaysia continues to plan for a 20% market share for Islamic banking and takaful in 2010. The share for Islamic banks is currently about 17% and for takaful 7%.
  
• China could be the next large market for Islamic finance, although regulatory hurdles remain.
  
• The Islamic Bank of Britain is offering 2-year Islamic CD's yielding 4.5%, which will be fund the bank's Shari'ah-compliant financing. The bank recently revealed it had faced increases losses because of low interest rates that decreased the net interest margin on its financing activities.
  
• QFinance launched an online reference guide to finance, including Islamic finance.
  
• An Islamic cooperative bank has been opened in India. It marks another step on the slow development of the Islamic finance industry in India.
  
• Islamic banking has begun to grow in Kazakhstan eight months after it changed laws to accommodate the industry.
  
• The most recent issue of sukuk al-salam from the Central Bank of Bahrain were 100% oversubscribed with BD12m in subscriptions for the the BD6m issued.
  
• Dow Jones has released the performance for September of its Islamic indices.
  
• In an interview, the CEO of Hilal Bank is asked about the need for central regulation of Shari'ah-compliance, as well as the fallout from the credit crisis and the potential conflict of interest caused by Shari'ah boards being employed by the institutions they oversee.
  
• Abu Dhabi's Tourism Development and Investment Company issued a $1.45 billion sukuk al-ijara that will have a AA rating from S&P.