Exchangeable Sukuk Structure

Exchangeable Sukuk Structure

   1. Obligor (Company A) sells Shares (i.e. transfer of beneficial ownership) to ABC Ltd. (a special purpose company)  that in turn, sells the beneficial ownership of Shares to XYZ Ltd. (a special purpose company) (Issuer).

   2. The Issuer, issues the Exchangeable Trust Certificates (the “Sukuk”) which evidence the beneficial ownership  interests of Sukuk Holders in the Shares.

   3. Company A enters into a Purchase Undertaking Deed with the Issuer, for the benefit of the Sukuk Holders, whereby Company A undertakes to purchase the Shares from the Issuer, upon occurrence of certain events at an agreed price.

   4. Expected fixed Periodic Payments will be provided to Sukuk Holders in cash out of the Dividends paid out by the Shares. Periodic payment is scheduled to be paid semi-annually to the Sukuk Holders. The Periodic Payments,  which are NOT guaranteed by Company A, will be payable in arrears, subject to sufficient funds being available from the dividend generated by the underlying pool of shares.

   5. Any excess Dividends paid from the Shares, above the Periodic Payments, will be accumulated in a Sinking Fund, up to an agreed amount. Once requisite funds have been accumulated in the Sinking Funds, any excess Dividends  up to a certain limit, will be paid to Company A as fees, for services rendered

   6. Upon maturity, the Issuer will exercise its option to sell the Exchange Property (beneficial ownership) to Company A at the Scheduled Dissolution Amount, pursuant to the Purchase Undertaking Deed issued by Company A Scheduled Dissolution Amount to be defined as (Purchase price + agreed return to maturity) agreed upfront between the Issuer and Company A at initiation stage.


Exchangeable Sukuk Structure - Exchangeable Mechanism

   7. Sukuk Holders have an “Exchange Right” i.e. right to take “possession” of the Shares during an agreed period (the  “Exchange Period”) before maturity of the Sukuk, and cancel the Sukuk Certificate

   8. Sukuk Holders issue unilateral irrevocable mandatory undertaking (the “Cash Settlement Purchase Right Deed”)  that gives Company A right of first refusal to purchase the Exchange Property and make cash payment for the Exchange Property upon exercise of the Exchange Right

   9. Issuer appoints Exchange Agent. Upon request from Sukuk Holders during Exchange Period, Exchange Agent will exercise Sukuk Holders’ Exchange Rights

 10. Exchange Agent will:
         −  Carve out Shares corresponding to the Certificates (Sukuk)
         −  Cancel the Certificates and its corresponding rights
         −  Offer the Shares to Company A (for exercise of its Purchase Right)
         −  If Company A exercises the Purchase Right, Exchange Agent receives Cash Settlement Purchase Price from Company A and forwards Cash Settlement Purchase Price to Sukuk Holders, effectively allowing cash settlement by Company A
         −  If Company A does not exercise the right, Exchange Agent forwards the Shares to Sukuk Holders