Top Banner
Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary Market Securities and Exchange Organization (SEO) May 2012
45

Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Mar 31, 2015

Download

Documents

Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Page 1: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Iran’s Experience inIjarah Sukuk

4th International Course on Islamic Capital Markets

Fereshteh Rahimi AlmasiFinancial Expert

Supervision on Primary Market

Securities and Exchange Organization (SEO)

May 2012

Page 2: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Parts of the speech

Part 1: Regulations history

Part 2: The Regulations governing the activities of SPVs

Part 3: The Regulations Governing the Issue of Ijarah

Sukuk

Part 4: Operational procedure of Ijarah Sukuk issuance

Part 5: Statistics of issuance

4th International Course on Islamic Capital Markets- May 2012

Page 3: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Part 1:Regulations history

Page 4: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Regulations history

1. The Securities Market Act of Islamic Republic of Iran (November 2005)

2. The Regulations Governing the Issue of Ijarah Sukuk (January 2008) After

Sharia Board establishment in 2006

3. The Law for Development of New Financial Instruments and Institutions

(November 2009)

4. The Regulations Governing the Issue of Ijarah Sukuk (August 2010)

The Regulations Governing the activities of SPVs (August 2010)

5. Amendment of the Regulations Governing the Issue of Ijarah Sukuk (2011) and

Regulations Governing the Financial Reporting of SPVs and Originators (2012)

4th International Course on Islamic Capital Markets- May 2012

Page 5: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Securities Market Act of Islamic Republic of Iran (to be continued …)

• The public offering of securities in any manner whatsoever shall be

forbidden without applying the provisions of this Act.

• Some securities shall not require registration at the discretion of

the Council.

• Registration of securities with the SEO shall not entail confirmation of

any privileges, guarantee of profitability or any recommendation and

advice.

• The securities public offering shall take place within the period of

time specified by the SEO. 4th International Course on Islamic Capital Markets- May 2012

Page 6: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Securities Market Act of Islamic Republic of Iran (… continued)

• To approve new financial instruments, was set out as

one of the functions of the Council.

• To propose the utilization of new financial instruments in

the securities market, was set out as one of the functions

of SEO's board of directors;

4th International Course on Islamic Capital Markets- May 2012

Page 7: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The definition of Ijarah Sukuk and it’s procedure:

The procedure of approving the securities definition:

The definition of Ijarah Sukuk :

• The transferable securities which bear the name of the holder and

each certificate proves the joint ownership of its holder in the

underlying assets of Ijarah Sukuk issuance.

4th International Course on Islamic Capital Markets- May 2012

SEOSEO CouncilSharia Board

Page 8: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Regulations Governing the Issue of Ijarah Sukuk (January 2008)

Not implemented, because of:

– Some executive matters

– Tax ambiguity

4th International Course on Islamic Capital Markets- May 2012

Page 9: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Law for Development of New Financial Instruments and Institutions

• Permitting the SPVs establishment as one of the

financial institutions under the Securities Market Act,

• Control of the process by SEO:

– The funds raised shall be pooled in a special account and

any withdrawal from such account shall take place under

the supervision and with the approval of SEO.

• Clarifying the tax problems with tax related rules.

4th International Course on Islamic Capital Markets- May 2012

Page 10: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Tax related rules (to be continued …)

• Tax advantages for SPVs:

– The SPV shall be exempt from payment of any

tax

• Tax advantages for investors:

– No tax whatsoever shall be claimed for the

transfer, issuance and redemption of the

foregoing securities.4th International Course on Islamic Capital Markets- May 2012

Page 11: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Tax related rules (… continued)

• Tax advantages for Originators:

– The proceeds gained from selling assets to the SPV so as provide financial

resources through public offering of securities shall be exempt from tax.

– BUT, the depreciation expenses arising from assets value appreciation in

the repurchase of the same assets by the seller, in whichever manner, shall

not be regarded as parts of the tax deductable.

– The profit and fees paid or allocated for securities on the condition of

registering these securities with the SEO, shall be regarded as parts of

acceptable expenses for assessment of taxable income of such securities

issuer. 4th International Course on Islamic Capital Markets- May 2012

Page 12: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Part 2:The Regulations

Governing the activities of SPVs

Page 13: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

SPV's ownership structure

4th International Course on Islamic Capital Markets- May 2012

•Others (2%)TSE (20%)•Iranian OTC

(29%)CSD (49%)

AMC (99%) •CSD (1%)

SPV

Page 14: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Regulations governing the activities of SPVs (to be continued …)

4th International Course on Islamic Capital Markets- May 2012

• The “Central Assets Management Company” is

established as a private joint-stock entity for the

purposes of assets management and administering the

SPV.

• The SPV is established in the form of a “limited liability

company” by the Central Assets Management

Company.

Page 15: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Regulations governing the activities of SPVs (to be continued …)

4th International Course on Islamic Capital Markets- May 2012

• All logistical services for the SPV shall be handled by the AMC.

• The SPV shall not be allowed to engage in other activities

whatsoever.

• A different SPV is specified for each issuance/project.

• The opening, closing, withdrawal and transfer of monies from

the account in which the funds derived from Sukuk issuance is

done according to the standards approved by the SEO.

Page 16: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The Regulations governing the activities of SPVs (… continued)

4th International Course on Islamic Capital Markets- May 2012

• The use of proceeds derived from sale of securities by the SPV for other

purposes shall be forbidden, excluding for the implementation of the

project connected with the Ijarah Sukuk issuance.

• After the issuance and use of the funds earned for the project connected

with such issues, the investing of cash flows shall be allowed solely in the

securities which shall bear the guarantee of repaying the principal

amount and its accrued interest as well as in the bank deposits.

• The SPV shall have to manage the funds available while protecting the

interests and rights of investors.

Page 17: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Part 3:The Regulations

Governing the Issue of Ijarah Sukuk

Page 18: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

General Model for Ijarah Sukuk

4th International Course on Islamic Capital Markets- May 2012

OriginatorOriginator SPVSPV

3 .Sells asset

SukukholdersSukukholders

1 .Issues Sukuk

4 .Pays money 2 .Pays money

Page 19: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Two types of Ijarah Sukuk regarding the bodies

4th International Course on Islamic Capital Markets- May 2012

• Seller and lessee are different persons

• Seller and lessee are the same (sell and

leaseback)

Page 20: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Seller and lessee are different persons

4th International Course on Islamic Capital Markets- May 2012

ManufacturerManufacturer SPVSPV

3 .Sells asset

SukukholdersSukukholders

1 .Issues Sukuk

4 .Pays money 2 .Pays money

Paying agentPaying agent

7 .Paying rentals as agent of SPV

OriginatorOriginator

6 .Paying rentals

5. Asset leasing as agent of investors

Page 21: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Seller and lessee are the same (sell and leaseback)

4th International Course on Islamic Capital Markets- May 2012

OriginatorOriginator SPVSPV

3 .Sells asset

SukukholdersSukukholders

1 .Issues Sukuk

4 .Pays money 2 .Pays money

Paying agentPaying agent

5. Asset leasing as agent of investors

6 .Paying rentals

7 .Paying rentals as agent of SPV

Page 22: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Legal relationship between investors (Sukuk holders) and SPV

4th International Course on Islamic Capital Markets- May 2012

• The client-attorney relationship: Possession of Ijarah Sukuk shall be

deemed as the acceptance of the issuer's procuration and such

procuration shall remain valid and irrevocable until the final settlement

of Ijarah Sukuk.

• The SPV, on behalf of the Sukukholders, has to spend the funds derived

from sales of Ijarah Sukuk on acquiring the assets connected with the

issue and leased them to the originator.

• The holders of Ijarah Sukuk shall not be allowed to request the division

of the assets underlying the issuance of Ijarah Sukuk.

Page 23: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Two types of Ijarah Sukuk regarding the lease contracts

4th International Course on Islamic Capital Markets- May 2012

• Lease-purchase (lease-based possession) contract;

• Lease contracts with SPV's authority to sell assets on the

due date of rent payment at the fixed price.

Page 24: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Organs or bodies for Ijarah Sukuk Issuance

4th International Course on Islamic Capital Markets- May 2012

• Originator/Seller

• SPV

• Selling agent

• Underwriter

• Guarantor

• Market maker

• Paying agent (CSD)

Page 25: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The following agents can raise money through Ijarah Sukuk issuance:

4th International Course on Islamic Capital Markets- May 2012

• The non-governmental legal entity that:

– has been legally formed as joint-stock, cooperative,

investment fund or non-governmental public entities

except municipalities;

• The public or governmental legal entities which

include:

– The municipalities;

– The governmental institutes or companies.

Page 26: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The non-governmental legal entity as an originator shall meet the following requirements:

4th International Course on Islamic Capital Markets- May 2012

• Registered and active in Iran;

• the total cash flow derived from its operations must be

positive in the two recent fiscal years;

• its maximum total liabilities to assets ratio is ninety (90%)

percent;

• the opinion expressed by the company auditor concerning

the financial statements for the two recent fiscal periods

should not be "adverse" or "disclaimer“.

Page 27: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The guarantor shall be appointed merely from among the following entities as being acceptable to the SEO.

4th International Course on Islamic Capital Markets- May 2012

• The banks,

• Credit and financial institutions regulated by the Central Bank of I.R.I.,

• Insurance companies regulated by the central Insurance of I.R.I.,

• Investment banks,

• Investment companies,

• Public entities and the governmental institutes or companies.

The guarantor shall not be under the control of the originator and this matter shall

be confirmed by the originator's auditor.

Where the Ijarah Sukuk has a credit rating approved by the SEO, it shall not be

required to appoint a guarantor.

Page 28: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Assets General Specifications

4th International Course on Islamic Capital Markets- May 2012

• Utilization of the assets within the area of originator's activity shall result in cash flows

or prevent cash outflows;

• There shall not exist any legal, contractual or judicial restrictions or whatsoever on

transfer of the assets as well as the accrued interests and the rights thereupon;

• Possession and exercise of ownership rights thereof shall not impose any restriction

whatsoever on the SPV;

• There will not exist any joint ownership (except the whole ownership is transferred);

• Transfer of assets to another party will be possible;

• The assets shall, until the time of transferring the assets ownership to the issuer, have

proper and adequate insurance coverage.

Page 29: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Type of acceptable assets

4th International Course on Islamic Capital Markets- May 2012

• Land;

• Buildings and installations;

• Machinery and equipment;

• Means of transportation.

Page 30: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Assets general specifications

4th International Course on Islamic Capital Markets- May 2012

• The assets value and its economic life shall be appraised by

the experts designated by the Association of Official Experts

of the Judiciary or other reliable ways approved by the SEO.

• Assets with determined formal prices, which the SPV buys

them directly from a producer, are except from pricing again.

• The approximate assets value shall not be lower than about

4 million dollars.

Page 31: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The payments related to the Ijarah Sukuk shall be made in two manners

4th International Course on Islamic Capital Markets- May 2012

• Full payment of rents on the due dates until the final maturity;

• Partial payment of rents on the due dates until the final maturity

and clearance of the remainder at the final maturity.

The final profit arising from rentals management until the

final maturity shall be calculated at the maturity of Ijarah

Sukuk and paid to the holders.

Page 32: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Part 4:Operational procedure of

Ijarah Sukuk issuance

Page 33: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Operational procedure of Ijarah Sukuk issuance

4th International Course on Islamic Capital Markets- May 2012

1. The originator consults with a licensed financing advisor about the

appropriate financing method and its overall parameters.

2. The advisor hands in the necessary documents.

3. The primary permission is issued and the SPV is allotted to the Ijarah

Sukuk.

4. Necessary contracts in addition to other documents such as the

registration statement and the prospectus are handed in by the advisor.

5. The final permission of the Ijarah Sukuk issuance is given and Securities

are offered.

6. The selling contract and Ijarah contracts are signed.

Page 34: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

1- The originator consults with a licensed financing advisor about the appropriate financing method and its overall parameters. It includes these events

4th International Course on Islamic Capital Markets- May 2012

1. The originator signs the financing and Ijarah Sukuk offering contract

with the advisor.

2. The advisor investigates the compliance of rules and regulations

about the originator, asset, contracting parties and so on.

3. The originator prepares the necessary reports to be considered by

the auditor.

4. The advisor negotiates with different parties and gets their

admission.

Page 35: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

2-The advisor hands in the necessary documents according to rules and regulations, such as:

4th International Course on Islamic Capital Markets- May 2012

1. The financing and Ijarah Sukuk offering contract;

2. Application for primary agreement;

3. The financial feasibility study of the project to be done by money raised through Ijarah Sukuk and the auditor's

special report about it. This report shall concern the fulfillment of the conditions of the assets general specifications;

4. Originator's audited financial statements for the two recent fiscal periods;

5. The report of the originator's board of directors on the recent fiscal period;

6. The originator's articles of association;

7. The sellers agreement letter on selling the asset;

8. Asset ownership documents;

9. The report of the expert(s) on the assets value and its economic life;

10. The confirmation of State Registration for Deeds and Landed-Estate Properties;

11. Asset insurance agreements;

12. The organs agreement letter on willingness to take the responsibilities.

Page 36: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

3-The primary permission is issued by the SEO and the SPV is allotted to the Ijarah Sukuk. At this phase the following contracts must be signed:

4th International Course on Islamic Capital Markets- May 2012

1. Commitment to sell the asset (if the seller and lessee are different

persons);

2. Commitment to lease the asset by the originator;

3. Ijaras Sukuk selling, Underwriting, Paying, Guaranteeing and Market

making contracts;

Page 37: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

4-The following documents are submitted by the advisor:

4th International Course on Islamic Capital Markets- May 2012

1. Contracts between involved organs;

2. Application for registering the securities;

3. The registration statement and the prospectus;

4. The bank account opened considering the SEO's rights on it.

Page 38: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The registration statement shall, as the case may be, contain the following items:

4th International Course on Islamic Capital Markets- May 2012

1. The originator's and the securities specifications;

2. The types of lease contracts, rentals and the payment manner;

3. The report on the risk analysis associated with the originator's area

of activity;

4. The securities credit rating, if any.

Page 39: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

The SEO's agreement:

4th International Course on Islamic Capital Markets- May 2012

1. If the information and documents are incomplete, the SEO shall,

within 30 days, reflect the matter to the issuer and request for an

amendment.

2. Where the documentation has been completed, the SEO shall,

within 30 days at the latest as of the date of filing the application,

announce its agreement or disagreement with the securities

registration to the issuer.

Page 40: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

5-The final permission of the Ijarah Sukuk issuance is given and Securities are offered.

4th International Course on Islamic Capital Markets- May 2012

1. The underwriter will take up the securities which have not been

sold within the subscription period.

2. Within 15 days after the expiry of the public offering period, the

results of securities sales and distribution must be disclosed to the

SEO.

3. The SEO confirms the completion of the public offering process.

Page 41: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

6-The selling contract and Ijarah contracts are signed.

4th International Course on Islamic Capital Markets- May 2012

1. The selling contract according to the confirmed format is signed.

2. Simultaneously the utilization of the funds so collected will be

authorized by the SEO.

3. Then Ijarah contract is signed according to the confirmed format.

Page 42: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Information disclosure of the originator, if it has not been registered with the SEO, includes the following items:

4th International Course on Islamic Capital Markets- May 2012

• The audited annual financial statements prepared according to the

Regulations Governing the Financial Reporting of SPVs and Originators;

• The important information such as:

– The events affecting the activities, financial standing and outcomes of the

originator's performance;

– The decisions and conditions influencing the capital structure and raising the

funds for the originator;

– The change in the originator's ownership structure;

– The material information affecting the securities price issued to raise the

finance.

Page 43: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Part 5:Statistics of issuance

Page 44: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Statistics of issuance

4th International Course on Islamic Capital Markets- May 2012

originator date asset

volume

(million

dollars)

rate

(percent)

life

(years)

Mahan Air co. 2010/03/11 1 Airbus airplane 28 20 4

Saman bank 2011/06/12 8 Buildings 85 20 4

Omid investment management

co.2011/08/16

3 pieces of lands (for

building)103 20 4

Mahan Air co. 2011/08/23 4 Airbus airplanes 86 20 4

Joopar Passenger & Freight

Trains Co2012/01/08

293 Passenger & Freight

Trains37 20 4

340

Page 45: Iran’s Experience in Ijarah Sukuk 4 th International Course on Islamic Capital Markets Fereshteh Rahimi Almasi Financial Expert Supervision on Primary.

Thank You For Your Attention