A sukuk structure that involves granting the investor (sukuk holder) a share of a tangible asset or business venture along with a corresponding share of the total risk (that is, a share commensurate with this ownership). In this structure, there is a true sale transaction, where the originator sells the underlying assets to a special purpose vehicle (SPV) that holds these assets and issues the sukuk backed by them. The buyers of sukuk don’t have recourse to the originator if payments are less than usual.
A true sale implies that the assets of the issuer will not be added to the assets of the originator in the event of default and liquidation. The sukuk holders must assume any losses in case of impairment of sukuk assets. Asset-backed sukuk are, thus, closer to equity than debt, and for that reason are not so popular in the market of sukuk offerings.
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