Download - STRUCTURE OF GOVERNMENT SUKUK CASE OF INDONESIA Bandar Seri Begawan, 30 th Nov – 4 th Dec 2015
STRUCTURE OF GOVERNMENT SUKUKCASE OF INDONESIABandar Seri Begawan, 30th Nov – 4th Dec 2015
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Structure of Government SukuksCase of Indonesia
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1. Indonesian Government SukukStructure for State Budget (Unspecified)
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Investors
Sales of Asset
Proceeds
Lease of Asset
Sukukissuance
Proceeds
Declaration of Trust / Wakalah
Sales of Asset
SBSN issuance
Maturity date
Secondary Market
Lease Payment / coupon
Sukuk Redemption payment
Sukuk
Redemption
Paying Agent
Investor
MoF - GOI(Obligor/Originator)
MoF - GOI(Obligor/Originator)
SPV (PP SBSN)
(Issuer/ Trustee)
SPV(Issuer/ Trustee)
Structure Sukuk Negara (SBSN)Ijarah Sale & Leaseback Through SPV
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Interesting problem to be anticipated is the concept of sale & leaseback in accordance with sequential process sale (Al Bay’) – leaseback (Al Ijarah) – saleback (Al Bay’) is not really just transfer of beneficial ownership but also transfer of title of ownership or just transfer of domain of ownership.
If the issuer of sukuk is not careful with concept of this sale and leaseback, Bay’ Al Inah which forbidden by majority of ulama can be formed, this can be happening when in sequential process sale in the beginning and saleback in the end only consits of two parties and conditioned in the aqd that one party at first sell to other party with other party in the end has to sell back to the original seller.
The bases of Government Sukuk are National Sharia Board – Indonesian Council of Ulama No. 69 – 72 years 2008.
The positive base law of Government Sukuk is Law No. 19 year 2008 which also related with the fatwas.
Sukuk Negara – Government SukukIjarah Sale & Leaseback
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Aqd Sale Document (Al Bay’) between issuer (Special Purpose Vehicle Company – SPVC can be used) and investors (Trustee Company as representative of investors can be used);
Aqd Leaseback Document (Al Ijarah) between investors (Trustee Company as representative of investors can be used) and the user of Ijarah Objects in this case End Users or SPVC or any parties represented by SPVC;
The Essence of Sequential signing of documents has different spirit with Bay’ Al Inah which has prerequisite from the beginning of Aqd Sale (Al Bay’) that the ijarah objects have to be resold to issuer or SPVC at Sukuk’s maturity date
Sharia compliant legal formal documents for Sukuk Ijarah Sale & Leaseback consists of:
Wa’d Documents (one side agreement) of Saleback from investors (not to be stated in first Aqd Sale) to resell the Ijarah Objects to issuer or SPVC;
Issuer or SPVC can reanticipate this first Wa’d with another Wa’d in making sure to buy (optional).
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Legal Formal Government Sukuk –Ijarah Sale and Leaseback
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2. Sovereign Sukuk (SS) Wakalah bil Istithmar
Concept of SS Wakalah
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SS issuer company shall declare that they act as Trustee / Representative of the SS owner to manage fund that proceeds from issuance of SS in a variety activities that generate profits.
As representative, SS issuer company deliver to prospective investors the planned use of funds in variety of activities to be conducted, among others:
•The plan of activity type
•The plan of activity contexture
•Estimate of the benefits of each activity
•Estimate of the composit benefits
Wakalah that will be used is wakalah without any ujrah or wakalah with ujrah.
The issuance has the purpose that SS can be traded at secondary market, SS issuer company has to maintain the composition of minimum 55% activities in the form o tangible assets.
SS rewards is profits that earned from the results of the investment activities which undertaken by the SS Issuer company. Rewards can be granted to the owner during the term periodically and/or at maturity according to the contract.
Basic Structural Concept of SS Wakalah
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SS Issuer CompanyA. SS IssuerB. Trustee/ Wakil bil Istithmar
SS Issuer CompanyA. SS IssuerB. Trustee/ Wakil bil Istithmar
Investor(Muwakkil)Investor
(Muwakkil)
1b.Issuance of SS
2.Proceeds 9. Acquittance SS
6. Periodically rewards
5. Investment Profits3. Investment Activities
1a. Declaration of Trust
GoI (Originator)
4. Proceeds
GoI(Obligor)
8. Payment on purchase of SS assets
7. Purchase of SS assets
SS Assets
SS Assets
Basic Structure Explanation of SS Wakalah (1)
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Issuance:
1a. SS issuer company shall declare that they act as Trustee/ Wakil bil Istithmar of the SS owner to manage fund that proceeds from issuance of SS in a variety activities that generate profits:
• SS issuer company deliver to prospective investors the planned use of funds in variety of activities to be conducted;
• Wakalah contract that used is wakalah without any ujrah (bi dunil ujrah);
• SS issuer company inform that investment activities are conducted, among others: The plan of activity type The plan of activity contexture, Estimate of the benefits of each activity, Estimate of the composit benefits;
• The issuance has the purpose that SS can be traded at secondary market, SS issuer company has to maintain the composition of minimum 55% activities in the form o tangible assets.
1b. Issuance of SS wakalah by SS issuer company.
2. Fund that proceeds from issuance of SS.
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Investment Activities and SS Rewards:
3. SS Issuer company conduct variety of profitable activities, such as Ijarah, Tijarah, and others that comply to sharia.
4. Investment activities fund.
5. Profits that earned from the results of the investment activities will be granted to the SS owner as reward. SS rewards can be granted during the SS terms periodically and/or at maturity according to the contract.
6. Paying SS rewards periodically to SS owners.
Maturity:
7. At maturity, the Government should buyback the SS assets with price that according to the contract.
8. Payment price on the purchase of the SS assets.
9. Acquittance of SS.
Basic Structure Explanation of SS Wakalah (2)
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3. Methods of GoI Sukuk Issuance
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Regular issuance in domestic market: Auction:
Medium and long-term tenor
Bookbuilding: Wholesale Sukuk Retail Sukuk Project Financing Sukuk (in process of constructing regulations)
Private placement: IDR ror foreign currency denominated
Regular issuance in International Market:Global Sukuk
GoI Sukuk Issuance Program
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Determining the Underlying Asset
Preparing the Sukuk Structure
Appointing the Arranger and Legal Consultant
Forming of Prospectus and Equity Market Documents
Evaluating the sharia compliance of sukuk
Offering:- Book
running- Roadshow
Forming of Legal Documents.
Global Sukuk can be issued as a Reg S/144 A or Global SEC offering.
Allocation
Distribution
Finalization of Legal and Equity Market Documents
Clearing
Settlement
Closing
Listing
Steps of GoI Sukuk Issuance:Bookbuilding
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Announcement of Auction Plan
Investor
Dealer A
Dealer B
Auction Participants
1.aBidding
6.bAwarded Bid
1.bBidding
6.aAwarded Bid
BI-SSSSTrading Platform
DSS-MoFDecision Support
System
Publication of Auction Result
DMO-MoF
Tabulation/ Allocation
Data Bidding
BI-RTGSv.sBI-SSSS
DVP Settlementa.Paymentb.Securities Transfer
Auction Rules and Monitoring
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Steps of GoI Sukuk Issuance:Auction
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Frequency : Monthly Price Method : Multiple-Price No. of Series : Multi Tranches Tenor Sukuk Structure : Ijarah – Sale and Lease Back Underlying Asset : State-owned Asset Window Time : 10.00 – 12.00 WIB Auction Agent : Bank Indonesia Central Registry : Bank Indonesia Auction Participants : Commercial Banks & Investment
Banks
GoI Sukuk IssuanceAuction Method
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The Sovereign Syariah Securities still traded until May 2015
Source : OJK, IDX, dan DJPU Depkeu RI
Development of the Sovereign SyariahSecurities in Indonesia
No Name of Sukuk Issuer Year Nominal (Rp.) Tenor Maturity Date
1 SBSN Seri IFR0001 GoI 2008 2.714.700.000.000 7 years 15 August 2015
2 SBSN Seri IFR0002 GoI 2008 1.985.000.000.000 10 years 15 August 2018
3SBSN Seri IFR0003
GoI2009 2.632.000.000.000 6 years
15 September 2015
4 SBSN Seri IFR0005 GoI 2009 1.171.000.000.000 8 years 15 January 2017
5 SBSN Seri IFR0006 GoI 2009 2.175.000.000.000 21 years 15 March 2030
6 SBSN Seri IFR0007 GoI 2009 1.547.000.000.000 16 years 15 January 2025
7 SBSN Seri IFR0008 GoI 2009 252.000.000.000 11 years 15 March 2020
8SBSN Seri IFR0010
GoI2011 4.110.000.000.000 25 years
15 February 2036
9SBSN Seri PBS001
GoI2012 6.725.000.000.000 6 years
15 February 2018
10 SBSN Seri PBS002 GoI 2012 1.218.000.000.000 10 years 15 January 2022
11 SBSN Seri PBS003 GoI 2012 3.786.000.000.000 15 years 15 January 2027
12SBSN Seri PBS004
GoI2012 10.149.000.000.000 25 years
15 February 2037
13 SBSN Seri PBS005 GoI 2013 9.934.000.000.000 30 years 15 April 2043
14SBSN Seri PBS006
GoI2013 8.934.000.000.000 7 years
15 September 2020
15SBSN Seri PBS007
GoI2014 7.150.000.000.000 26 years
15 September 2040
16 SBSN Seri PBS008 GoI 2015 12.695.000.000.000 1 years 15 June 2016
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The Sovereign Syariah Securities still traded until May 2015
Source : OJK, IDX, dan DJPU Depkeu RI
Development of the Sovereign SyariahSecurities in Indonesia
No Name of Sukuk Issuer Year Nominal (Rp.) Tenor Maturity Date
17Sukuk Ritel Seri SR-0004
GoI 2012 13.613.805.000.000 3 years21 September
2015
18Sukuk Ritel Seri SR-0005
GoI 2013 14.968.875.000.000 3 years27 February
2016
19Sukuk Ritel Seri SR-0006 GoI
2014 19.323.345.000.000 3 years 05 March 2017
20Sukuk Ritel Seri SR-0007 GoI
2015 21.965.035.000.000 3 years 11 March 2018
21 SPN-S 14072015 GoI 2015 1.000.000.000.000 6 months 08 July 2015
22 SPN-S 11082015 GoI 2015 1.000.000.000.000 6 months 10 August 2015
23SPN-S 11092015
GoI2015 1.000.000.000.000
6 months08 September
2015
24 SPN-S 08102015 GoI 2015 1.000.000.000.000 6 months 13 October 2015
25SPN-S 06112015
GoI2015 780.000.000.000
6 months06 November
2015
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4. IIFM Interbank Unrestricted Master Investment Wakalah Agreement
What is the IIFM Inter-Bank Unrestricted Master Investment Wakalah Agreement?The IIFM Inter-Bank Unrestricted Master Investment Wakalah
Agreement is a framework agreement which sets out the terms upon which the Muwakkil (Investor) will transfer certain funds to the Wakil (Agent) as its agent to invest such funds in a Shari’ah compliant manner
Entering into the Master Agreement does not of itself give rise to any transactions. After the Parties have entered into the Master Agreement, they may subsequently enter into Wakalah Investment Transactions which will be subject to and governed by the Master Agreement
Note that the Governing Law of the Master Agreement may be decided by the Parties, although the Agreement had been prepared on the implicit understanding that English Law will be the Governing Law predominantly used
1IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
What is the purpose of entering into an Unrestricted Inter-Bank Wakalah Agreement?
For many years, IFI’s have relied mainly on commodity Murabahah for their wholesale liquidity management purposes notwithstanding issues and concerns related to commodity Murabahah transactions, such as the cost of commodity brokerage, or the amount of Shari‘ah compliant commodities available at any particular moment in time to cover transaction volumes etc
In order to diversify the range of liquidity management solutions available to the IFI’s, the last few years have witnessed the active use by IFI’s of Wakalah arrangements/transactions particularly Unrestricted Wakalah as an alternative liquidity management tool. The objective of this activity has been to reduce the over reliance by the IFI’s on commodity Murabahah
2IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
What are the Key Features of the Master Agreement?
The key features of IIFM Inter-Bank Unrestricted Master Investment Wakalah Agreement are:
Clause 1 (Definitions and Construction)
This clause defines terms used in this Wakalah Master Agreement, details the rules of construction which apply to the Master Agreement and explicitly states that only the Parties may enjoy the benefits of this Master Agreement (Clause 1.4). In addition, the purpose of Clause 1.3 (Single Contract) is to clarify that, as the Master Agreement is a framework agreement, when Wakalah Investment Transactions are subsequently entered into, the Master Agreement will apply to such Wakalah Investment Transactions. So, although a Wakalah Investment Transaction will be a separate document, the Wakalah Investment Transaction will be regarded as entered into upon the terms set out in the Master Agreement and covered by the framework created by the Master Agreement.
3IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
Clause 2 (Wakalah Terms and Conditions)
This clause deals with the appointment by the Muwakkil of the Wakil as its agent in relation to each Wakalah Investment Transaction
Clause 3 (Wakalah Investment Transactions)
This clause states that the Master Agreement does not of itself create an obligation on the part of the Wakil or the Muwakkil to enter into any Wakalah Investment Transactions.
Clause 4 (Payments)
This clause deals with the mechanics of how payments are made under this Master Agreement, the currency of payments
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What are the Key Features of the Master Agreement? (continuation)
IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
Clause 5 (Representations)
This clause contains a set of standard representations which each Party is required to make including that they have the power and authority to enter into Wakalah Investment Transactions and that they do not have any proceedings pending against them.
Clause 6 (Undertakings)
This clause requires each Party to undertake amongst other things that it will comply with all laws and regulations to which it may be subject and that it will notify the other Party of any Default.
Clause 7 (Events of Default)
The occurrence of certain events will result in termination of any Wakalah Investment Transactions then in existence. Such events include the Wakil failing to pay any amounts under the Master Agreement, misrepresentation by a Party and insolvency. The clause also details what happens upon the occurrence of an Event of Default (See Clause 7.7) and the payments due thereunder (See Clause 7.8).
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What are the Key Features of the Master Agreement? (continuation)
IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
Clause 8 (Early Termination)
This clause deals amongst other things with the right of the Muwakkil to terminate a Wakalah Investment Transaction, the Wakil’s acceptance of an Early Termination Request and the ability of the Wakil to notify the Muwakkil of a Revised Anticipated Profit Rate (See Clause 8.3).
Clause 9 (Late Payment Amount)
This clause obliges a Party to pay a Late Payment Amount where it fails to pay a sum on a Due Date. Clause 9.2 (Calculation of Late Payment Amount) deals with how the Late Payment Amount is calculated and Clause 9.3 (Payment of Late Payment Amount) covers how such amount shall be applied.
6IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
What are the Key Features of the Master Agreement? (continuation)
Clause 10 (Miscellaneous)
This clause contains miscellaneous agreements of the Parties, including a provision that neither Party may assign its rights under the Master Agreement and when notices are deemed to be served.
Clause 11 (Governing Law and Jurisdiction)
This clause contains the governing law and dispute resolution forum provisions. The governing law is to be selected by the Parties. The forum for dispute resolution will be the courts of the jurisdiction of the governing law unless the Parties choose arbitration.
7IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
What are the Key Features of the Master Agreement? (continuation)
The Schedules1. Schedule 1 (Form of Wakil Offer Notice) (Offer)
2. Schedule 2 (Form of Muwakkil Acceptance Notice)
When the Parties wish to enter into a Wakalah Investment Transaction they should do so by completing Schedules 1 and 2 in accordance with the mechanics detailed in Clause 3 (Wakalah Investment Transactions).
8IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
What are the Key Features of the Master Agreement? (continuation)
Are There Any Other Features ofthe Master Agreement?
Yes, this agreement is supplemented with a set of items as follows:
1. Operational Guidance Memorandum which covers the operational procedures to be implemented by the Wakil as well as the Wakil and Muwakkil responsibilities
9IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
Operational Guidance Memorandum Process Flow
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Start
Wakil makes an offer for an Unrestrcited Wakalah transaction. The offer, amongst other things, shall include the following:· Anticipated Profit Rate (APR)· Maturity· Wakalah Pool· Co-mingled vs Segeregated pools
Muwakil accepts the offer
Muwakil transfers the investment amount to the
Wakil
Early termination A
B
No
Yes
A
Offer
Acceptance Fund Transfer
At maturity determine the return earned on the contract
Wakil pays the Muwakil Investment Amount +APR – Wakil Fee and retain the excess (incentive fee) (clause 3.4 (a) 3.5)
Wakil pays the Muwakil Investment Amount +APR – Wakil Fee (clause 3.4 (a))
Wakil pays the Muwakil Investment Amount +Actual Profit – Wakil Fee (clause 3.4 (b))
Return> APR
Return = APR
Return < APR
Wakil pays the Muwakil Investment Amount – Negative return – Wakil Fee (clause 3.4 (c))
Negative return
End
IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta
11
Affected party informs the other party on becoming aware of event
B
Default by Wakil(clause 7.8)
Wakil sends a notice to Muwakkil notifying the inability to honour the anticipated return
Muwakil sends a notice requesting for a early termination
Voluntary exit of Muwakkil(clause 8.1)
Revised profit rate notice(clause 8.3)
Illegality(clause 8.5)
Wakil is to pay the Muwakil investment amount + lower of APR and Actual Profit Rate calculated up to the day of notification of Muwakkil – Wakil Fee
In case the Wakil accepts the request the Wakil shall notify the Muwakkil of the acceptance. Early Termination date shall be the date of acceptance
Muwakil notifies the Wakil of an early termination due to default on behalf of Wakil
Wakil pays the Muwakil investment amount + lower of APR and Actual Profit Rate calculated up to the day of notification of Muwakkil - Wakil Fee
Wakil is to pay the Muwakil investment amount +lower of APR and Actual Profit Rate calculated up to the day of notification of Muwakkil – Wakil Fee – Actual Administrative and Out of Pocket Expenses
In case the Muwakil decides to continue with the contractWakil is to pay the Muwakil investment amount + total profit calculated up to the day of notification of Muwakkil + revised profit rate calculated from the notification date to maturity date – Wakil Fee
In case the Muwakil decides to terminate the contractWakil is to pay the Muwakil investment amount + Lower of APR and Actual Profit Rate calculated up to the day of notification of Muwakkil - Wakil Fee
End
Operational Guidance Memorandum Process Flow (continuation)
IIFM Industry Seminar on Islamic Capital and Money Market
Tuesday, 6th May 2014, Bank Indonesia, Jakarta