Whether Asset Backed or Asset Based
Wan Abdul Rahim Kamil
Consultant, Islamic Capital Market
Securities Commission Malaysia
Introduction
 The uniqueness of Sukuk al Ijarah is that it is normally
facilitated by a Special Purpose Vehicle.
 The SPV:
 Acts for and on behalf of the investors by as per the
Trust Deed
 Holds the ijarah asset in trust for the Investors
 However it is to be noted that not all structures having
an SPV is an Asset Backed Securitisation
Asset Backed
Securitisation
4. Delivery of completed assets. Progress
payments against progress deliveries
Equipment
Suppliers
Assets
1.(a) Order for
assets by SPV.
Istisna’
Contract
Originator
1. Negotiations for
lease of assets to be
procured
6. Ijarah
Rental
Payments
$
5. Ijarah of assets to Originator; now assuming
role as Obligor
8. Upon termination of Ijarah, asset sold to Originator
Sukuk al Ijarah Rental s
Admin. Account
SPV for
Sukuk Al Ijarah
2. Issuance of
Sukuk to raise
fund for
procurement of
asset
3. $
Sukuk
Sukuk
Sukuk
Assets
3. Subscriptions $
7. Distribution of Profits and final settlement to
Investors
QUALIFIED
INVESTORS
Under this structure, the assets are not purchased by the Originator but by a
third party supplier. This is a true sale.
 Asset-backed securitisation thus is
 an asset-based transaction in which the funding for the acquisition of the
asset is derived from investments evidenced by the sukuk issued by the
SPV.
 The asset is purchased from the originator under a true sale arrangement
 The true sale isolates the asset completely from the originator and at the
same time all rights and obligations in the said asset are thus transferred to
the SPV
 However, all obligations on the sukuk i.e. the income stream attached to it
shall rest upon the originator who now plays the role as servicer i.e. the
entity that is undertaking to administer the assets or perform such other
services on behalf of the SPV as may be required in the said securitisation
transaction.
4
1.(a) Sale of assets owned by Originator
to the SPV
Originator
1. Negotiations for
lease of assets to be
procured
6. Ijarah
Rental
Payments
$
5. Ijarah of assets to Originator; now assuming
role as Obligor
8. Upon termination of Ijarah, asset sold to Originator
Sukuk al Ijarah Rental s
Admin. Account
Asset Based
Securitisation
Assets
SPV for
Sukuk Al Ijarah
2. Issuance of
Sukuk to raise
fund for
procurement of
asset
3. $
Sukuk
Sukuk
Sukuk
Assets
3. Subscriptions $
7. Distribution of Profits and final settlement to
Investors
QUALIFIED
INVESTORS
Under this structure, the assets are purchased from the Originator . It is in
form, a Sale and Leaseback followed by a buy-back upon termination of the
Ijarah. The structure thus is not a true sale. Please note that even though the
purchase is followed by a transfer of legal title; it fails the True Sale because of
the Sale and Leaseback followed by the PU to buy back.
wark06@gmail.com
rahim@seccom.com.my