The Sukuk Summit 2007
“SURVEY OF CURRENT SUKUK STRUCTURES – SCOPE FOR FUTURE
DEVELOPMENT OF HYBRID, EXCHANGEABLE & DERIVATIVE SUKUK”
Badliysah Abdul Ghani
Executive Director / CEO
CIMB Islamic Bank Berhad
21 June 2007
Contents
Section 1
Development of Sukuk Structures
Section 2
Current Trends: Hybrid Sukuk
Section 3
Features of Future Sukuk
Section 4
Conclusion
Section 1
Development of Sukuk Structures
Malaysia – The land of Sukuk innovation
The world’s various Sukuk structures originated from Malaysia:1990 - First Bai-Bithaman Ajil Islamic debt securities – Shell MDS Sdn Bhd
1994 – First Sukuk Mudharabah – Cagamas Berhad – World’s first IRMBS
2001 – First Sukuk Ijarah corporate bond – Kumpulan Guthrie Berhad
2002 – First Sukuk Ijarah sovereign bond – Government of Malaysia
2003 – First tradable Sukuk Istisna – SKS Power Sdn Bhd
2005 – First Sukuk Musyarakah – Musyarakah One Capital Berhad
2006 RM Sukuk by Shariah principle
Mudharabah
7.5%
Bai' Bithaman Ajil
6.2%
Murabahah
9.4%
Istisna'
2.1%
Ijarah
4.9%
Musyarakah
70.0%
Source: SC Annual Report 2006
Sukuk Development in the Global Market
List of Rated USD Sukuk
Principle
Amount
USD150 million
Year
2001(expired in
2006)
Kumpulan Guthrie Bhd.
Ijarah
BBB+(MARC)
Malaysia Global Sukuk Inc.
Ijarah
USD 600 million
2002
A3 (Moody’s), A- (S&P)
LMC Bahrain Sukuk Co.
Ijarah
USD 250 million
2003
A (S&P)
Solidarity Trust Service
Ijarah
USD 400 million
2003
BBB (S&P)
Qatar Global Sukuk
Ijarah
USD700 million
2003
AA-(S&P)
BMA International Sukuk
Ijarah
USD 250 million
2004
A (S&P)
Sarawak Corp Sukuk Inc.
Ijarah
USD 350 million
2004
Aaa1(Moody’s), A-(S&P)
Musyarakah
USD 200 million
2005
A(S&P)
IDB Trust Services Ltd.
Ijarah
USD500 million
2005
AAA(S&P)
Pakistan Int. Sukuk Co.
Ijarah
USD600 million
2005
B1(Moody’s), B+(S&P)
Abu Dhabi Islamic Bank
Musyarakah
USD800 million
2006
A2(Moody’s), A (Fitch)
East Cameron Gas
Musyarakah USD165.75 million
2006
CCC+ (S&P)
SIB Sukuk Co. Ltd.
Tabreed 06 Financing
Corporation
Musyarakah
USD225 million
2006
BBB(S&P)
Istisna’ / Ijarah
USD200 million
2006
BBB-(S&P)
DIB Sukuk
Musharakah
USD750 million
2007
A1(Moody’s),A(S&P)
MBB Sukuk
Musharakah
USD300 million
2007
BBB+(S&P)
DIFC Sukuk
Mudharabah
USD1.5 billion
2007
A+ (S&P)
Issuer
Gold Sukuk DMCC
Source : Bloomberg Q1 2007
Rating
The bulk of USD Sukuk are
issued by companies within the
GCC
Most USD Sukuk adopt Ijarah
or
Musyarakah
as
the
underlying Islamic principle
 The
first
Ijarah
and
Musyarakah deals in the GCC
were executed after Malaysia
had done the same in 2001 and
2005 for Kumpulan Guthrie Bhd
and Musyarakah One Capital
Bhd respectively
Section 2
Current Trends: Hybrid Sukuk
Scope for Hybrids
Islamic Convertible Bonds
Year
Issuer
Amount
(USDmil)
Islamic
Principle
Tenure
Country
2006
PCFC Development FZCO
3,500
Musyarakah
2 years
UAE
2007
Aldar Properties PJSC
2,530
Mudharabah
5 years
UAE
2007
IIG Funding Limited
200
Mudharabah
5 years
Kuwait
 Began in 2006
 Occurring in GCC
 Trend expected to follow
In 2007, two companies based in the U.A.E have announced plans to issue convertible Sukuk worth a combined
total of USD1.3 billion.
Islamic Exchangeable Bonds
 In 2006, Khazanah Nastional Berhad (the Malaysian Government’s investment arm) issued the world’s first
Shariah-compliant exchangeable bond
 Largest exchangeable instrument issued out of Asia ex Japan in the year 2006 to date
 Largest ever exchangeable bond out of Malaysia
Distribution by Geography
 USD750 million Sukuk exchangeable into ordinary shares of RM1.00
Middle East
27%
each of Telekom Malaysia
 Listed on Labuan International Financial Exhange and Hong Kong Stock Exchange
 Certificates immediately traded up after pricing
 Still remains as the only Islamic exchangeable bond in the world
Others
73%
Section 3
The Features of Future Sukuk
The Features of Future Sukuk – Derivatives
 Malaysia has been at the forefront of developing the Islamic financial derivatives market.
 Islamic derivative products in Malaysia that have been approved by the Central Bank of Malaysia consist of:Islamic Profit Rate Swap (IPRS)
Islamic Cross Currency Swap (ICCS)
Forex Forward / Forex swap
Shariah Compliant Option based on Urbun concept
Call Warrants
Commodity Futures
Recent Developments

In November 2006, two Malaysian Islamic financial institutions broke new ground in Islamic finance with
both banks agreeing to execute a derivative master agreement to document Islamic Derivative
transactions.
•
The document is the first of such industry initiative in the world to standardize a document governing
Islamic derivative transactions

In July 2006, two banks in Malaysia signed the first Islamic cross currency swap deal

There is immense potential in the Derivative Sukuk universe and Malaysia will undoubtedly spearhead the
innovation
Section 4
Conclusion
Conclusion
Due credit should be given to the Government of Malaysia for encouraging product innovation
in the Islamic capital market
The Sukuk market is vibrant and dynamic in Malaysia and the GCC. It is encouraging to see
issuers from other parts of the world following suit.
It is inevitable for new products to enter the Sukuk market as the industry grows
It is true that the Sukuk market is now relatively more sophisticated than what it once was but
much more work needs to be done in the future
Contact Details
Badlisyah Abdul Ghani
Executive Director / CEO
CIMB Islamic Bank Berhad
1s Floor, Menara Promet, Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia.
Tel: +603 2116 1234, Fax: +603 2144 8509
Email: badlisyah.abdulghani@cimb.com
Website: www.cimbislamic.com
Appendix
Appendix
Islamic structure for Khazanah’s Islamic Exchangeable Bonds
Sukukholders
Rafflesia
Orchid
Khazanah
i.
Two special purpose companies, Rafflesia Capital Ltd.
(“Rafflesia”) (the Issuer) and Orchid
Capital
Ltd.
(“Orchid”) will be held in trust for the benefit of charities to be nominated
by Khazanah.
ii.
Khazanah will sell the Exchange Property, comprising the
beneficial ownership of Shariah- compliant assets, i.e. shares
to Orchird, which in turn sells the beneficial ownership in the
shares to Rafflesia.
iii.
Khazanah will retain the voting rights attached to TM shares.
Rafflesia has the beneficial interest over TM shares which it
holds in trust for the Sukuk holders.
iv.
The Issuer then issues the Exchangeable Trust Certificates
which evidence the beneficial ownership interests of Sukuk
holders in the shares.
v.
Expected fixed periodic payments will be provided in cash out
of the dividends paid out by the shares.