CASES STUDIES IN SUKUK IJARAH STRUCTUREGROUP 2

ZUHAIRA NADIAH AIMI NADIRAH NURUN NADIA

MALAYSIA TNB NE SUKUK

INTRODUCTION

•TNB Malaysia has won tender launched by Energy Commission of Malaysia to design, supply, construction, commissioning, operation and maintenance of a 1,071.43MW combined cycle gas-fired power plant to maintain the reserved margin above 20% for Peninsular Malaysia. Project site located in Prai,Butterworth,Penang, •TNB awarded the project to TNB Prai and TNB Prai created a SPV to undertake the project and acted as the Issuer of the Sukuk which is the TNB NE.•TNB Prai as the project company was awarded a concession for the design, construction, ownership, operation and maintenance of CCGT power plant in Prai, Penang, under a 21-year PPA. The generated electrical power will then be purchased by the TNB, pursuant to a PPA.

SUKUK DETAILS

SUKUK STRUCTURE

ANALYSIS OF ISSUES

ISSUES EXPLANATION

Sukuk Default •There will be less possibility for sukuk default as this Sukuk been aided by TNB as the Sponsor/rolling guarantee to TNB NE (Issuer)

•Ultimately, as TNB is indirectly owned by the government, this alone serves the basis for the market confidence in all its corporate issuances.

QATARQATAR GLOBAL

SUKUK 2003

INTRODUCTION

•The Government of Qatar through the Qatar Global Sukuk (QGS) has issued a rated trust certificates (Sukuk) which ultimately been used for the general funding purposes to raise Shariah compliant funds.

•The purpose of this Sukuk is to mobilise resources for the construction of Hamad Medical City (HMC) in Doha.

•This Sukuk has been listed in Luxembourg Stock Exchange and the Labuan International Finance Exchange.

SUKUK DETAILS

QATAR(LESSEE)

QATAR(SELLER)

SPV

INVESTORS/

SUKUK HOLDERS

SUKUK STRUCTURE

Certificateproceed

Certificateproceed

Title to Land Parcel

Periodic and dissolution distributions amount

Lease rental and exercise price on a dissolution event

SPV leases the land parcel to Qatar for 7 years terms and sells on dissolution event

ISSUES

DUBAINAKHEEL

SUKUK 2006

INTRODUCTION

•Nakheel Sukuk was issued in Dubai and is the largest sukuk offering ever executed in the world, USD $ 3.52 billion.

•Sukuk issuance took place on 14th December 2006 by Nakheel Development Limited, its SPV arranged by Dubai Islamic Bank.

•The purpose is to build a city twice the size of Hong Kong Island, with skyscrapers for 1.5 million residents, all ringed by a 75 km canal at Dubai Waterfront.

No. Subject Details

1. Type of Sukuk Ijarah2. Purpose Property development at Dubai

Waterfront3. Assets DWF South & Crescent Lands4. Obligor Nakheel Holdings (1, 2, 3)5. Issuer/SPV Nakheel Development Limited6. Lead Manager Dubai Islamic Bank/Barclays Capital7. Issue size USD $ 3.52 Billion8. Issue date 14th December 20069. Maturity date 14th December 200910. Tenor 3 Years

SUKUK DETAILS

No. Subject Details

11. Governing Law English Law & UAE Law

12. Guarantor Dubai World

13. Documentations a. Purchase Agreement b. Lease Agreementc. Servicing Agency Agreementd. Sale undertakinge. Purchase undertakingf. Agency declarationg. Declaration of Trusth. Security Agency Agreement

SUKUK HOLDERS

NAKHEEL DEVP. LIMITED (ISSUER)

NAKHEEL HOLDINGS 1

NAKHEEL CO. PJSC

NAKHEEL HOLDINGS 2

1. Certificates Sukuk Proceeds

2. Sukuk Assets Purchase Price

3. Funds

4. 3-yr lease of Sukuk Assets

SUKUK STRUCTURE

5. Lease payments

6. Profits distribution

ISSUESIssue ExplanationCredit Crisis • Even though there is a guarantee made by Dubai World, but

due to credit crisis the situation has led to near-default sukuk repayment.

Declaration of trust and the guarantees were governed by English Law

• The UAE courts probably would not recognize the jurisdictional choice of the parties.

Contradictory issue pertaining guarantee made by Dubai World

• There was a disclaimer clause in the prospectus stating that the Govt. of Dubai will not have liability in respect of the Sukuk.

• However, guarantee was made by the Dubai World (state-owned co.) – implicitly it was guaranteed by the govt.

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