IslamicFinance.de

In continuation of its efforts to develop and diversify investment channels in the capital markets via offers of securities, the Capital Market Authority (CMA) approved Saudi Hollandi Bank’s request to offer SUKUK. Of which the value will be determined at a later stage by the company.

The Dubai International Financial Centre Authority released the “DIFC Sukuk Guide” - a comprehensive introduction to various sukuk structures, as well as legal and regulatory information on issuing sukuk from the DIFC and listing sukuk on NASDAQ Dubai. Prepared by Clifford Chance, Amanie Consulting, the DFSA and the DIFC Authority, the guide provides a summary of sukuk structures and information on issuing sukuk in DIFC.

The full report is for download at the link below:

King & Spalding published a briefing on the recent request by Dubai World that all its creditors agree to a standstill on any amounts payable to them until at least 30 May 2010 and the new law issued by the Ruler of Dubai, HH Sheikh Mohammed Bin Rashid Al Maktoum, setting out what will occur in the event that Dubai World or any of its subsidiaries are in an insolvency situation.

The briefing is authored by Michael Rainey and Sara Carmody of King & Spalding London and Dubai offices.

Following recent events in Dubai, there has been a flurry of articles on sukuk defaults, with some commentators suggesting Islamic finance will wane. While many seem sure that defaults will occur, others have suggested sukuk holders’ rights and the resolution options available to them are no different from conventional bondholders’. Oliver Ali Agha and Claire Grainger offer a counter-argument to that perception.

The Investment Dar Co. K.S.C.C. ("TID") and the Coordinating Committee of TID's banks and investors ("Coordinating Committee") presented a comprehensive restructuring plan to restructure TID's financial arrangements with its wider bank and investor group in Kuwait and Dubai on 24 and 25 November, respectively.

Saudi-based Islamic Development Bank (IDB) plans to issue Islamic bonds, or sukuk, in the first half of next year worth around $850 million.

Dubai tries to restore its reputation on Thursday, assuring investors that major property and leisure projects would go ahead and dispatching two top officials on a public relations drive to Washington.

Repayment of a $4.1 billion (around Dh15.05 billion) bond issued by Nakheel was set to be completed yesterday, when other Islamic bond issuers reassured investors about their repayment capability in replies to a ‘soundness and health' check by Nasdaq Dubai.

The government of Abu Dhabi and the Central Bank of the UAE has announced that it has agreed to provide $10 billion to the Dubai Financial Support Fund.

The Dubai Financial Support Fund can therefore enable Nakheel to pay its Sukuk due today.

Nakheel Development Limited announced via the exchange, Nasdaq Dubai that it aims to repay the Sukuk in the next two weeks. According to the statement it will use funds that will be provided by the Dubai Financial Support Fund.

THE Ministry of Finance issued $68 million worth of sukuk in two separate floats between November and December, bringing the total sold to more than $2 billion. The Ministry of Finance had completed the successful pricing of its 40th and 41st issuances of short-term Sukuk Al-Ijarah securities.

Full news of the about the issuance of the sukuk is available at the link given below.

The question was analysed by Mr John Foster of BBC where it was concluded that anything that is not prohibited under the Al-Quran and the As-Sunnah is permissible. The full news is available at the source stated below.

The UK Government has committed to create a level playing field on VAT for retail investors in Islamic finance products. In his Pre-Budget Report statement, the Chancellor, Alistair Darling, says he will also provide relief from tax on capital gains for alternative property refinance transactions to maintain the UK's position as a centre for Islamic finance.

In addition, guidance will be issued on VAT treatment of alternative finance investment bonds.

The Zawya Collaborative Sukuk Report covers the following issues:

• What is the distribution of current and potential investors and what is their appetite?

• What is the appetite of the Supply side and what drives their need to issue?

• What are the challenges faced by the industry, what are the associated developments and what needs to be done to resolve them?

The download is free after providing contact details to Zawya:

The Financial Times produced a special looking into the Future of Islamic Finance.

The download is free of charge.

Dear Readers,

An article in the Financial Times, has discussed the legal issues surrounding to an eventual Event of Default of the Nakheel Sukuk, which can be read here:

http://www.ft.com/cms/s/0/215c0502-e038-11de-8494-00144feab49a.html

Some comments came afterwards referring to that piece, e.g. on FT Alphaville:

http://ftalphaville.ft.com/blog/2009/12/04/86736/nakheel-and-the-sukuk-l...

Claiming that because of Sharia law in the UAE there is uncertainty regarding burden sharing.

Such a claim is an error. While the Sukuk was structured to comply with Sharia the various Agreements are either governed by English law or UAE law.

Therefore it is crucial to see how assets could be seized under UAE law not under Sharia law: A nice summary of the dispute resolution in the UAE is free for download by the law firm Afridi and Angell:

http://www.legal500.com/assets/images/stories/firmdevs/disputeresolution...

Dear Readers,

some background on the standstill:

Sukuk prospectus of the related Nakheel entity:
http://blogs.thenational.ae/economy_blog/Nakheel%20Development%201%20Pro...

citation:
"Risks Relating to the Co-Obligors and the Co-Obligor Group Strategy

The growth strategy of the Co-Obligor Group is based on certain assumptions relating to, inter alia,
economic conditions, market for real estate and demographic conditions in Dubai. [...] This could, for example, have an impact on the rental income, sales proceeds or other income (such as management fees) available to the Co-Obligor Group and the value of its projects, which could affect its ability to make payments under he Transaction Documents."

and the issue of implicit sovereign support was nicely discussed in a blog:
http://blogs.thenational.ae/economy_blog/2009/08/nakheels-bond-prospectu...

The rational behind is explained by a rating agency here in 2007:
http://www2.standardandpoors.com/spf/pdf/media/sp_approach_to_sukuk_17-s...

"from its parent also benefited from strong implicit government support."

Press Release

Several Dubai Government-Related Entities Downgraded And On Watch Negative Following
Debt Restructuring Announcement

DUBAI (Standard & Poor's) Nov. 25, 2009--Standard & Poor's Ratings Services said it
had taken rating actions on a number of Dubai-based government related entities
(GREs) and transactions (for full details see "Ratings List" below). Standard &
Poor's has downgraded DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone
(FZE), Dubai Holding Commercial Operations Group LLC (DHCOG), and Emaar Properties
PJSC. All of these entities have been placed on CreditWatch with negative
implications. The ratings on Dubai Multi Commodities Centre Authority (DMCC) were
affirmed, although they were placed on CreditWatch negative. A CreditWatch negative
placement also applies to the notes issued by Thor Asset Purchase (Cayman) Ltd.
(Thor), which are securitized by cash flows from a revolving pool of existing and
future receivables originated by Dubai Electricity and Water Authority (DEWA; not
rated).

The rating actions are the result of the announcement on Nov. 25 of the

Dubai World, a conglomerate owned by the government of Dubai, is asking its creditors for a six-month “standstill” on its obligations. Dubai World includes Nakheel, which has USD 4 bn in outstanding Islamic debt falling due next month.

The International Finance Corporation (IFC), the multilateral development bank, will list a USD 100 mn 5-year Sukuk in Dubai and Bahrain. The IFC plans to return to the market with new issuances every 12 months to 18 months.