---------- Forwarded message ---------- From: Rustem Nabiyev <[email protected]> Date: Fri, Oct 15, 2010 at 12:50 PM Subject: [nidal_islamic-finance-english:6] BNE: Some sukuk suck To: [email protected]
http://www.businessneweurope.eu/story2345/Some_sukuk_suck Some sukuk suck bne October 15, 2010 Supporters of Islamic finance saw an opportunity when the international financial crisis exposed the flaws in the western model of finance. Events, however, have shown that the much-heralded "ethical" *sukuk *bonds too are vulnerable to default. The near-collapse of Dubai World, one of the emirate's three main state-owned business groups, toward the end of last year and the default on *sukuk *bonds issued by Nakheel, one of its property developer subsidiaries, badly shook investor confidence. This was further harmed when three other *sukuk *issuers defaulted. Sales of Islamic bonds were down 22% in the first half of this year. These problems have prompted investors in the $130bn Islamic bond market to push for stronger rights of ownership of assets to protect against such defaults. Until now, there was some confusion by investors about what risks they were taking on. A *sukuk *bond is structured to comply with *Sharia *law by not paying interest to investors but giving them a share of the revenues from certain assets that are placed in a special-purpose vehicle (SPV). However, this doesn't mean the bond was asset backed, ie. the investor can claim a share of the assets in the SPV upon default, but was merely asset based and so relies on the issuer agreeing to sell assets if they can't make interest payments on time. "When some originators have found themselves in financial trouble or, worse, have become insolvent, *sukuk *investors have found themselves unexpectedly competing with the general body of creditors, rather than simply enforcing against or taking possession of the assets supporting their *sukuk*," says Neale Downes, regional head of banking and finance for law firm Trowers & Hamlins in the Middle East. The obvious answer is to make more *sukuk *bonds asset backed than the just 4% that are currently rated by Moody's Investors Service. However, analysts point out that the legal environment in many countries is not supportive of asset-backed structures, meaning that such bonds will remain a minority of total issuance. This does, of course, open up opportunities for countries like Kazakhstan where such asset-backed structures are possible. -- You received this message because you are subscribed to the Google Groups "Kantakji Group" group. To post to this group, send email to [email protected] To unsubscribe from this group لفك الاشتراك من المجموعة أرسل للعنوان التالي رسالة فارغة, send email to [email protected] For more options, visit this group at http://groups.google.com/group/kantakjigroup?hl=en سياسة النشر في المجموعة: ترك ما عارض أهل السنة والجماعة... الاكتفاء بأمور ذات علاقة بالاقتصاد الإسلامي وعلومه ولو بالشيء البسيط، ويستثنى من هذا مايتعلق بالشأن العام على مستوى الأمة كحدث غزة مثلا... عدم ذكر ما يتعلق بشخص طبيعي أو اعتباري بعينه باستثناء الأمر العام الذي يهم عامة المسلمين... تمرير بعض الأشياء الخفيفة المسلية ضمن قواعد الأدب وخاصة منها التي تأتي من أعضاء لا يشاركون عادة، والقصد من ذلك تشجيعهم على التفاعل الإيجابي... ترك المديح الشخصي...إن كل المقالات والآراء المنشورة تُعبر عن رأي أصحابها، ولا تعبّر عن رأي إدارة المجموعة بالضرورة.
