The State Bank of Pakistan (SBP) on Tuesday announced another auction of Government of Pakistan (GoP) Ijara Sukuk against M-3 Motorway. Industry sources said that upcoming Ijara Sukuk is expected to be amounting some Rs 49 billion and will be issued against the M-3 Motorway for a period of three years and this will be the first ever Sukuk of this fiscal year 2014-2015.
The M-3 is a 52km long strip of motorway is situated in Punjab and connects Faisalabad with M-2 near Pindi Bhattian. The valuation of the Assets will be carried out by at least two PBA approved independent valuators and the lower of the two valuations will be used to determine the purchase price of the Assets. Although the state bank has not announced any auction date, however the Islamic Banking Industry (IBI) is expecting that auction will be held before June 30, 2014, they added. They said that this auction will provide some new investment opportunities to accommodate surplus liquidity Islamic Banking Industry.
Under the Sukuk Subscription Undertaking, the investors will also appoint an Islamic Financial Institution (IFI) as their Agent (Investment Agent) for the purchase of the Assets on their behalf. The country's largest Islamic institution Meezan bank is likely to investment agent, industry sources said.
According to the SBP, in accordance with provisions of the notification of the Ijara Sukuk Rules, 2008, another GoP Ijara Sukuk will be issued as per the Transaction Structure described by the central bank. As per transaction mechanism, profit on the GOP Ijara Sukuk will be based on the rental rate benchmarked against the latest weighted average yield of the 6 month Market Treasury Bills or 6 month PKRV (as per FSCD circular 13 dated September 06, 2008). In addition, the rental rate as mentioned may be adjusted based on the difference between estimated supplementary rental and actual maintenance expenses of the underlying asset.
Further it has been decided that for this particular issue of GoP Ijara Sukuk (M-3), the total auction participation of a single Primary Dealer (PD) will be capped at Rs 25 billion or 20 per cent (whichever is the lower) of Total Demand & Time Liabilities-Islamic (excluding FE-25 deposits) of the respective PD Islamic bank / Islamic window of that particular PD.
For this purpose, Total Demand & Time Liabilities-Islamic as of 28th March, 2014 will be used as reported to the State Bank of Pakistan. In case any PD breaches the aforesaid limit, the SBP reserves the right to cancel all or some of the bids of the bank concerned.
All Islamic and commercial banks with Islamic Branches are designated as primary dealers for participating in the auction of the GOP Ijara Sukuk. A Service Agency Agreement will be executed between Investment Agent and GoP (acting through MOF) whereby GoP will be appointed as Service Agent to undertake Services relating to the leased assets during the term of the lease in consideration for a nominal fee.
However, in case the actual expenses for the Rental Period seem to exceed the Supplementary Rental allocated for that Rental Period by 50% or more the Service Agent would be required to obtain prior permission for incurring expenses beyond this threshold from the Lessor. In such cases the lessor shall have the right to abstain from incurring additional expenses over and above the 50% threshold in which case it shall be a Lease termination event. This would be properly incorporated in the Ijara Agreement. The Islamic Banking Department of State Bank of Pakistan shall be responsible for monitoring of: (i) proper execution & (ii) the legal documentation as per the approved Shariah structure, to ensure Shariah compliance and seamless management throughout the tenor of the Sukuk and at the time of maturity of the Sukuk.
Investment Agent will enter into a Purchase Agreement with GoP (acting through Ministry of Finance 'MOF') for purchase of an identified portion in the Assets at an agreed price equivalent to the Sukuk issue amount. The SBP has asked all designated Primary Dealers for the GoP Ijara Sukuk are advised to ensure meticulous compliance with the above instructions. While, all other instructions on the subject shall, however, remain unchanged.
Comments
Comments are closed.