Common Sukuk Structures

Sukuk Using Al-Ijarah Structure

Sukuk
holders
(8) Obligator make
(2) Leased the assets to periodic lease
obligator payment to SPV

(9) SPV pays coupon

to investors. (4) Trust Certificate
(1) Sell certain titles issued to investors
of land to SPV (3) Issued Trust
Certificate
Federal Land Trust
Obligator as
Commissioner
seller SPV Certificate
(7) Payments made (6) Payments
Issue
by SPV to Obligator received from
investors by SPV (5) Investors made
payments

Stage 1: Contract of Cash Sale (Bay’ Mutlakah)

− SPV purchases property (e.g. hospitals) from obligator (government) (1)
− The assets purchased by the SPV is funded by the issuance of sukuk (trust
certificates) which represents beneficial ownership in the assets and the lease
(3)
− Government received cash proceeds (7)

Stage 2: Contract of Leasing (Ijarah)

− SPV rents property to the government for specified period (2)
− SPV collects rentals (6)

Stage 3: During the tenure

− SPV passed the rentals to investors (9) – periodic distribution/coupon

Stage 4: At maturity
− SPV sells the property to the government at an agreed price
− Government pays cash to SPV
− SPV simultaneously pay investors cash for sukuk redemption
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Sukuk Using Musyarakah Structure - 1

Corporate
(6) Undertakes to buy
Musharakah Shares of
(4) Periodic profit + (1) Physical Asset the SPV on a periodic
incentive fee contribution basis

Musharakah

Investors
(3) Periodic profit
(2b) Issue proceeds

(2a) Sukuk
Proceeds

SPV
(5) Issues sukuk
Musharakah +
periodic profit

Corporate and the Special Purpose Vehicle (SPV) enter into a Musharakah
Arrangement for a fixed period and agreed profit sharing ratio and the
appointment of the Corporate as an agent to develop the land. Any losses will
be apportioned based on the capital contributed. The corporate undertakes to
buy Musharakah shares of the SPV on a periodic basis.

1. Corporate (as Musharik A) contributes land or other physical assets to the

Musharakah

2 a & b. SPV (as Musharik B) contributes cash i.e. the issue Proceeds received
from the investors to the Musharakah

3. The Corporate as an agent of the Musyarakah to develop the land (or other
physical assets) with the cash injected into the Musharakah and sell/lease the
developed assets on behalf of the Musharik B.

4. In return, the agent (i.e. the Corporate) will get a fixed agency fee plus a
variable incentive fee payable.

5. The profits are distributed to the Sukuk holders.

6. The Corporate irrevocably undertakes to buy at a pre-agreed price the

Musharakah shares of the SPV on say semi-annual basis and at the end of
the fixed period the SPV would no longer have any shares in the
Musharakah.
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Structure of Sukuk Musyarakah -2

Investor Investor Investor

(1) Musyarakah Venture

(partnership arrangement) between (2) The Musyarakah Venture shall be
the Investors carried out through the Issuer in its
capacity as an agent
Issuer
(3) Issuer shall issue the
Sukuk Musyarakah to the
Musyarakah Partners) Trustee

(4) Trustee shall declare a trust over the

Trust Asset and all rights under the
Contruction of Project/ Musyarakah Venture
Contract or Undertaking the
Musyarakah Venture

Sukuk Musyarakah programme shall be established to facilitate the issuance of

the Sukuk Musyarakah from time to time.

1. The Musyarakah Venture (partnership arrangement) shall be entered into

between the Investors (Musyarakah Partners) to finance the Musyarakah
venture or construction of the project whereby all Musyarakah Partners shall
contribute capital contribution for such purpose and any profits from the
Musyarakah venture shall be distributed among the Musyarakah Partners
based on the profit sharing ratio as pre-agreed amongst them. Any losses
will be apportioned based on the capital contributed.

2. The Musyarakah Venture shall be carried out through the Issuer in its
capacity as an agent to construct and/or oversee the overall development
project and to receive the capital contribution in the Musyarakah Venture.

3. In return for the Musyarakah Partners’ capital contribution under the

Musyarakah Venture, the Issuer shall issue the Sukuk Musyarakah to the
Musyarakah Partners.

4. The Trustee shall declare a trust over the Trust Asset and all rights under the
Musyarakah Venture for the benefits of the Musyarakah Partners.
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Exchangeable Sukuk Structure

Investors

Sukuk Proceeds
Sukuk
Cash Settlement
Purchase Right Deed

Issuer (XYZ)
Obligor
(Company A)
Purchase
Undertaking Deed
Sale of Equity Pool Sale Price
(Nominal)

Sale Price
(Nominal))
SPV (ABC) Company A

Sale of Equity
Pool

1. Obligor (Company A) sells Shares (i.e. transfer of beneficial ownership) to ABC Ltd.
(a special purpose company) that in turn, sells the beneficial ownership of Shares to
XYZ Ltd. (a special purpose company) (Issuer).

2. The Issuer, issues the Exchangeable Trust Certificates (the “Sukuk”) which evidence
the beneficial ownership interests of Sukuk Holders in the Shares.

3. Company A enters into a Purchase Undertaking Deed with the Issuer, for the benefit
of the Sukuk Holders, whereby Company A undertakes to purchase the Shares from
the Issuer, upon occurrence of certain events at an agreed price.

4. Expected fixed Periodic Payments will be provided to Sukuk Holders in cash out of
the Dividends paid out by the Shares. Periodic payment is scheduled to be paid
semi-annually to the Sukuk Holders. The Periodic Payments, which are NOT
guaranteed by Company A, will be payable in arrears, subject to sufficient funds
being available from the dividend generated by the underlying pool of shares.

5. Any excess Dividends paid from the Shares, above the Periodic Payments, will be
accumulated in a Sinking Fund, up to an agreed amount. Once requisite funds have
been accumulated in the Sinking Funds, any excess Dividends up to a certain limit,
will be paid to Company A as fees, for services rendered

6. Upon maturity, the Issuer will exercise its option to sell the Exchange Property
(beneficial ownership) to Company A at the Scheduled Dissolution Amount, pursuant
to the Purchase Undertaking Deed issued by Company A Scheduled Dissolution
Amount to be defined as (Purchase price + agreed return to maturity) agreed upfront
between the Issuer and Company A at initiation stage.
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Exchangeable Sukuk Structure - Exchangeable Mechanism

Investors (Sukuk
Holders) Issuer
(XYZ Ltd)
Requests Equity
carve-out

Equity
Equities/Cash corresponding to
sukuk

Offer to purchase
Exchange Property
Obligor
Exchange Company A
Agent
Pay cash (if offer is
accepted)

7. Sukuk Holders have an “Exchange Right” i.e. right to take “possession” of the Shares
during an agreed period (the “Exchange Period”) before maturity of the Sukuk, and
cancel the Sukuk Certificate

8. Sukuk Holders issue unilateral irrevocable mandatory undertaking (the “Cash

Settlement Purchase Right Deed”) that gives Company A right of first refusal to
purchase the Exchange Property and make cash payment for the Exchange Property
upon exercise of the Exchange Right

9. Issuer appoints Exchange Agent. Upon request from Sukuk Holders during
Exchange Period, Exchange Agent will exercise Sukuk Holders’ Exchange Rights

10. Exchange Agent will:

− Carve out Shares corresponding to the Certificates (Sukuk)
− Cancel the Certificates and its corresponding rights
− Offer the Shares to Company A (for exercise of its Purchase Right)
− If Company A exercises the Purchase Right, Exchange Agent receives Cash
Settlement Purchase Price from Company A and forwards Cash Settlement
Purchase Price to Sukuk Holders, effectively allowing cash settlement by
Company A
− If Company A does not exercise the right, Exchange Agent forwards the
Shares to Sukuk Holders
Exchange
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Sukuk Using Al-Istisna’ Structure

Sukuk
holders

(1) Sukuk proceed

(5) SPV pays coupon

to investors.

(2) Sell asset to SPV (4a) Transfer

title to assets
End buyer
Contractor SPV
(3) Payments made (4b) Pay monthly
by SPV instalments to SPV

1. SPV issues Sukuk certificates to raise funds for the project.

2. Sukuk issue proceeds are used to pay the contractor/builder under the istisna’
contract to build and deliver the future project.

3. Title to assets is transferred to the SPV

4a & b. Completed property/project is leased or sold to the end buyer. The end
buyer pays monthly installments to the SPV.

5. The returns are distributed among the Sukuk holders.