Sukuk and Islamic Capital Markets
A Practical Guide
This practical title provides a comprehensive overview of the Islamic capital markets, tracking their development from the first sukuks to the current outlook after the global economic crisis and the recent Shariah rulings of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in relation to sukuk
This publication comes at a key juncture in the development of the Islamic capital markets, with the global financial crisis providing an opportunity for the different players in the Islamic capital markets to re-appraise successes and failures to date. More stringent Sharia oversight has also encouraged a recent critical re-evaluation of the structures used in the Islamic capital markets.
This practical title provides a comprehensive overview of the Islamic capital markets, tracking their development from the first sukuks to the current outlook after the global economic crisis and the recent Sharia rulings of the Accounting and Auditing Organisation for Islamic Financial Institutions in relation to sukuk. Featuring contributions by prominent practitioners - including Shibeer Ahmed from White & Case, Moinuddin Malim from Mashreq al Islami and Debashis Dey and Stuart Ure from Clifford Chance, among other leading professionals - this book analyses market trends and key Sharia and legal issues and structures. Cutting-edge topics include the standardisation of sukuk, securitisation, treasury and other capital markets and rate protection products.
With examples from practitioners who have helped to shape the Islamic capital markets, this book presents key insights for beginners, as well as more experienced practitioners. The guide is a practical handbook for legal practitioners, financial Institutions and bankers, central banks, university libraries and students and practitioners generally who have an interest in Islamic finance.
Table of Contents
|Part I: Overview of the Islamic capital markets||7|
|An overview of the sukuk market||7|
|The Islamic money market and its relevance to the Islamic capital markets||21|
|Part II: Legal and structural anatomy and parties||35|
|Comparisons and differences between sukuk and conventional products||35|
|Legal and structural anatomy of a sukuk||51|
|The role of the SPV issuer||57|
|The role of the delegate and paying agent in sukuk transactions||71|
|Part III: Regulation and standardisation of sukuk||81|
|Sukuk: standardisation and regulation||81|
|Part IV: New directions||103|
|Islamic treasury products: demystifying the tawarruq controversy||103|
|Restructuring and buy-back of sukuk||157|
|Part V: The road ahead||167|
|The future of sukuk: Islamic capital markets||167|
|About the authors||177|
The practical guide to sukuk and Islamic capital markets is very well written and comprehensive in its scope. The book provides excellent background material from which to build especially a legal perspective on the topics covered.
Associate Professor of Law, Singapore Management University
Overall, the book is a welcome contribution to this important sphere of Islamic capital market.
The Muslim World Book Review, 32:2
Partner, White & Case LLP
Shibeer Ahmed is a partner in the global projects department of White & Case LLP and has expertise in both Islamic and conventional banking and project finance. His experience includes advising project sponsors, commercial banks and development finance institutions on energy, power and transport infrastructure (including private-public partnerships) projects in Western and Eastern Europe, the Middle East and Africa.
Mr Ahmed has wide experience of advising on Islamic financings. His Islamic finance experience includes advising Islamic banks and development finance institutions on the Djibouti Port Project (the first Islamic project financing benefiting from a MIGA-World Bank Group political risk guarantee); advising Islamic banks on the conventional and Islamic co-financing of the Engro Fertiliser Project in Pakistan; and advising Islamic banks on the Gulf Cement Project in Qatar. He has also been involved in the Shariacompliant power, petrochemical and real estate financings in Saudi Arabia.
Partner and global head of Islamic finance, Hogan Lovells (Middle East) LLP
Rahail Ali is the global head of Islamic finance at Hogan Lovells. He is an acknowledged expert on Islamic finance, reflected in numerous accreditations from leading industry and legal journals, as well as his top-tier rating in various directories. Mr Ali has worked on many of the most innovative and high-value Islamic finance transactions closed to date, including ‘jumbo’ syndicated financings and inaugural sukuk issuances for sovereigns, IFC (World Bank Group), Emirates and Petronas (“Rahail Ali is arguably the leading figure in the sukuk market” – Legal 500 EMEA). Mr Ali is regularly consulted by leading publications as well as banks, governments and regulatory authorities, and is a member of Her Majesty’s Treasury’s Islamic Finance Experts Group.
Associate, Maples and Calder
Manuela Belmontes’s main areas of practice are international capital markets, structured finance and Islamic finance. She has worked on a number of Islamic sukuk transactions and other Islamic compliant financings, conventional debt offerings and debt issuance programmes, as well as bespoke securitisations for clients based in the Middle East, Europe and North America. Ms Belmontes also has experience working on a variety of Cayman investment funds including hedge funds, mutual funds and private equity funds, advising investment managers and administrators, and advising on general corporate and commercial matters, including joint venture arrangements. Ms Belmontes joined the Dubai office of Maples and Calder in 2007. Before that, she worked for Turner & Roulstone in Cayman, Clifford Chance LLP in London and Blake, Cassels & Graydon LLP in Toronto.
Partner, Clifford Chance LLP
Debashis Dey is a partner in the international capital markets practice of Clifford Chance LLP. He is currently based in the firm’s office in Dubai, the United Arab Emirates. Mr Dey specialises in complex financings that access the domestic and international capital markets, including Islamic finance sukuk issues, conventional bond issues and securitisation. His recent high-profile work includes some of the largest, most complex and innovative sukuk structures done in the Middle East and North Africa region. These include sukuk issues by Sorouh Real Estate PJSC, Tourism Development & Investment Company PJSC and others. Mr Dey also led the capital markets team responsible for structuring the aircraft sukuk sponsored by GE Capital, the largest international sukuk ever issued by a US corporate.
Senior associate, Hogan Lovells (Middle East) LLP
Roger Fankhauser is a senior associate in the Islamic finance team at Hogan Lovells in Dubai, and is recognised by SIX Swiss Exchange as an expert and knowledgeable representative of issuers. Dr Fankhauser has been involved in advising issuers and financial institutions on all legal aspects of issuing and listing equity and (conventional and Sharia-compliant) debt securities on the Australian Stock Exchange, London Stock Exchange, Nasdaq Dubai and SIX Swiss Exchange.
Since joining Hogan Lovells, Dr Fankhauser has worked on a number of sukuk transactions, including the issuance and listing of the first sukuk issued from Turkey and the $100 million sukuk due 2014 issued by the International Finance Corporation. Dr Fankhauser has also advised issuers and dealers on conventional bond transactions and the establishment of euro medium-term note programmes.
Chief executive officer, HSBC Amanah Malaysia
Rafe Haneef is the chief executive officer of HSBC Amanah Malaysia and is also responsible for Islamic global markets in Asia-Pacific. Since 1999 he has helped to develop sukuk and Islamic structured and project finance at HSBC, ABN AMRO and Citigroup. He has worked on a number of notable sukuk deals.
He was previously head of Islamic banking for Citigroup Asia in Kuala Lumpur, responsible for developing Malaysia as a regional Islamic finance hub for Citigroup. Before joining Citigroup, he established the global Islamic finance department at ABN AMRO in Dubai, and was in charge of the Islamic wholesale and retail businesses for the group. Previously, he was with HSBC Amanah in London and Dubai.
Mr Haneef read law and Sharia at the International Islamic University in Malaysia. He was admitted to the Malaysian Bar and practised law in Malaysia, specialising in Islamic finance. He then pursued his LLM at Harvard Law School and subsequently qualified to the New York Bar.
Partner, Maples and Calder
Tahir Jawed has unrivalled experience in the offshore structuring of Islamic finance products and was involved in the first sukuk issue by a Cayman company to be listed on NASDAQ Dubai, as well as inaugural sukuk issues to be listed on other worldwide exchanges. His expertise covers swaps/derivatives, general corporate and investment and private equity funds, including funds which comply with Islamic principles. Mr Jawed joined Maples and Calder in Cayman in 2000. He is managing partner of the Dubai office, where he has been a partner since 2005. He previously worked for Clifford Chance LLP in London, New York and Dubai. He is named as one of the 20 most prominent lawyers in the Middle East by The Brief magazine and is also ranked as one of the best lawyers in the United Arab Emirates by Best Lawyer magazine.
Legal adviser, Al-Yaqoub Attorneys & Legal Advisers in association with Hogan Lovells
Mustafa Kamal is a legal adviser in the Jeddah office of Hogan Lovells. He has worked with clients across a number of jurisdictions on a wide range of Islamic finance matters, including some of the largest sukuk transactions and Islamic project financings to date. Before joining Hogan Lovells, he worked with international law firms in Saudi Arabia and in the United States. Mr Kamal holds a JD from the University of Maryland, United States and is qualified as an attorney at law in Maryland, United States.
Associate, Hogan Lovells International LLP
Sema Kandemir is an associate in the capital markets practice of Hogan Lovells in London. Ms Kandemir joined the firm in 2005, where she worked in the capital markets team in London, frequently acting for trustees and paying agents in conventional capital markets transactions. She spent almost three years in the firm’s Dubai office, primarily focusing on Islamic and conventional debt capital markets, before returning to practise in London.
Ms Kandemir has been involved in a number of recent high-profile sukuk transactions, including for the government of Bahrain, the PETRONAS Global sukuk and the IFC Hilal sukuk, the first debt capital market product cleared and settled entirely in the Middle East.
Chief executive officer, Mashreq Al-Islami Finance Company; head of Islamic Bank Division, Mashreq Bank PJSC
Moinuddin Malim has vast experience of Islamic banking, stretching back nearly 20 years. He leads Mashreq Al-Islami, which acts as originator of deals and a product house serving the entire Mashreq banking group across regional markets and providing a full range of Sharia-compliant products and services to meet the retail and wholesale banking needs of its clients. Previously, Mr Malim was the managing director of Dubai Islamic Bank (DIB) for asset management and capital markets, where he successfully arranged a number of sukuks with a total value of $9 billion and Islamic investment funds. During his tenure, DIB established its credentials as Best Global Sukuk House (Euromoney) and Best Sukuk House (Banker Middle East), and topped the Euromoney lead tables in 2004 and 2005, plus other awards.
Mr Malim has also worked with the International Investor as senior partner, running the group’s investment banking activities in the United Arab Emirates and Qatar. His Islamic career started in the early 1990s with Al Baraka Banking Group.
Head of Islamic banking, Morgan Stanley
Yavar Moini is head of Islamic banking at Morgan Stanley and is based in the Dubai office. He has 16 years of banking experience, 12 of which have been spent in the Islamic finance industry. He has led the Islamic financial services group at Ernst & Young Bahrain and headed Islamic structured products for Dubai Bank and Islamic banking at the National Bank of Dubai. Mr Moini has served on the board of Bank Islami Pakistan and has been a part of the UK government’s Islamic finance experts group.
While at Morgan Stanley, Mr Moini has been involved in landmark transactions such as PETRONAS’s $1.5 billion five-year sukuk, which is one of two largest global dollar straight sukuk to date; Tabreed’s Dh1.7 billion mandatory convertible sukuk, which was the first mandatory convertible sukuk in the United Arab Emirates; and Tamweel’s $220 million mortgage-backed sukuk, which represented the first true sale securitisation in the United Arab Emirates.
Senior associate, Latham & Watkins LLP
Mark Morris is a senior associate with Latham & Watkins LLP. He has over five years’ Islamic finance experience advising governments, corporates and financial institutions on a wide range of Islamic finance transactions. Mr Morris has advised on Islamic equity funding structures, multi-source and wholly Islamic project financings, Sharia-compliant syndicated debt and Islamic asset finance transactions in the United States, Asia and all Gulf Cooperation Council jurisdictions.
Mr Morris holds the Islamic finance qualification issued by the UK Chartered Institute of Securities and Investment and is named as one of the world’s leading Islamic finance practitioners in the 2008 and 2010 editions of Expert Guides, a Euromoney publication.
Partner, Hogan Lovells (Middle East) LLP
Imran Mufti is a partner with Hogan Lovells, based in the Riyadh office of its associate firm, Al- Yaqoub Attorneys & Legal Advisors. He has practised in the Middle East for more than eight years, primarily concentrating on the areas of Islamic capital markets and structured finance. He is a regular speaker at conferences and seminars which focus on Islamic capital markets. Mr Mufti holds an LLB (Hons) from the University of London. He is qualified as a solicitor in England and Wales and an attorney at law in New York.
Senior associate, Hogan Lovells (Middle East) LLP
Daniel Rankin is a senior associate in the capital markets practice of the Dubai office of Hogan Lovells (Middle East) LLP. His practice in Dubai primarily focuses on the areas of capital markets (debt and equity), funds and regulatory issues. Before joining Hogan Lovells in 2007, Mr Rankin was with a major Canadian law firm.
Mr Rankin’s work in the Islamic capital markets has involved transactions such as the first-ever sukuk buy-back for Dubai Islamic Bank, the PETRONAS global sukuk (IFN Corporate Finance Deal of the Year 2010) and the IFC Hilal sukuk (the first capital market product cleared and settled entirely in the Middle East).
Senior associate, Clifford Chance LLP
Stuart Ure is a senior associate in the international capital markets practice of Clifford Chance LLP. He is currently based in the firm’s office in Abu Dhabi, the United Arab Emirates. Mr Ure specialises in structured finance and conventional and Islamic debt capital markets transactions. His recent work includes the sukuk issue by Sorouh Real Estate PJSC; acting for Tourism Development & Investment Company PJSC in relation to its global medium-term note programme and trust certificate issuance programme; and acting for Qatar Telecom QSC in relation to its global medium-term note programme.