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(d) Upon completion, themudarib, in its capacity as obligator, purchases
the assets of the project from the issuer.
An example ofsukuk al-mudarabais as follows:
Aldar Properties PJSC, an Abu Dhabi real estatedevelopment company,
issued a 4.75-yearsukukconvertible into its ordinary shares. Proceeds from
the transaction were used to fund Aldar’s ambitious real estate development
programme with Aldar acting as the mudarib. Thedeal was enthusiastically
received by investors and was heavily oversubscribed at the initial
transaction size. The deal was increased from $1,300 million to $2,530
million, highlighting the substantial interest for the issue. The strong
demand also allowed improved terms for Aldar; periodicprofit distribution
was set below the initial price guidance and conversion premium was set at
the top end of the range. Aldar, in its corporate capacity, also provided an
undertaking to purchase the assets of the mudaraba should the sukuk
certificate holders not convert their holdings into Aldar’s shares by the
maturity date (2011).
Aldar’s sukukconvertible broke many records. It was the:
- largest real estate convertible offering globally;
- largestsukukconvertible offering globally;
- longest-datedsukukconvertible from the Middle East;
- lowest funding rate of all precedent transactions; and
- secured highest conversion premium of all precedents.
Sukuk al-musharaka
Musharakameans a relationship established under a contract by the mutual
consent of the parties for sharing of profits and losses in the joint business.
All providers of capital are entitled to participate in management but not
necessarily required to do so. The profit is distributed among the partners
in pre-agreed ratios, while the loss is borne by every partner strictly in
proportion to respective capital contributions.
Sukuk al-musharakaare certificates of equal value issued with the aim of
using the proceeds for establishing a new project, developing an existing one
or financing acquisition of a business activity on the basis of a partnership
contract. The certificate holders become the beneficial owners of the assets
of the partnership as per their respective shares. Normally the party issuing
thesukukacts as the managing partner, with the sukukissuing vehicle on
behalf of the sukukholders as silent partner. Thesemusharakacertificates
can be treated as negotiable instruments and can be bought and sold in the
secondary market.
Steps involved in the structure:
(a) The corporate and SPV enter into amusharakaarrangement for a fixed
