An Introduction to Islamic Finance: Theory and Practice

Financial Engineering 253

Structure

Tamweel PJSC (asOriginator) Properties (1)Tamweel

Limited

Deutsche Bank AG London

Branch (as Principal Paying

Cash Manager, US$ AccountAgent, Reference Agent,

DIFC Bank and Escrow Agent)

US$

purchase

price

Issuer acquisition

agreement and TPL

declaration of trust:sale of certain of the

assets acquired from

the originator andbeneficial interest in

the properties

US$ purchase price

TPL acquisition agreement

Sale of properties and leases (includingright to rental payments)

ABN AMRO Bank

Account Bank andN.V. (as AED

PDC Manager)

Co. International plcMorgan Stanley &

(as Exchange Rate

Counterparty)

Deutsche Trustee Company

Limited (as Trustee andSecurity Trustee)

Investors US$

liquidityfacility

AED

liquidity

facility

Notes US$

AED Liquidity Facility ProviderStandard Chartered Bank (as

and US$ Liquidity Facility

Provider)

Tamweel PJSC (as Servicer)ENSEC Services LLC (as

Standby Services) Dubai

Second Standby Service)Islamic Bank PJSC (as

Escrow Bank(Bank with

minimum rating)

Spot Banks

Dubai

ReserveFund Cayman Islands

Tamweel Residential

ABS CI (1) Ltd

(Issuer)

Tamweel Residential ABS CI (1) Limited US$210 million Floating Rate Notes due 2037

US$

US$

US$

AED

AED

FIGURE 12.1 The Tamweel sukuk

Key Features of Sukuk

Recourse to assets

Under sukuk the investors become the owners of the pool of fi nan-

cial assets and the revenues and returns generated by those assets

is their sole payment source. Most sukuk issued in the market have

involved investors acquiring assets but not having full ownership of

the underlying asset or based on a promise by the issuer to buy the

underlying asset at a pre determined price. In other words, the main

focus of the investors has been the creditworthiness of the issuer,

rather than the value of the underlying assets. Because of this dis-

connect, sukuk have often been labeled as asset - backed, rather than

asset - linked. A statement issued by the AAOIFI has raised concerns

about the use of such structures.

The Tamweel issue, however, did not have any type of pre determined

purchase undertaking and also ensured that the title to the assets has

(Continued)