Structuring, Valuation, Risk and Accounting for Sukuk
SIDC CPE - accredited: 10 CPE Points

About The Seminar

The Sukuk market has evolved significantly in the last 20 years. New and exciting structures have emerged to address the economic and financial interests of both Sukuk originators as well as Sukuk investors. However, a tension exists between this objective, and conformity with Shariah principles. In order to satisfy market demand, many Sukuk are structured to provide cash returns resembling conventional products. Some financial obligations within these structures may not only compromise a stricter application of Shariah principles, but lead to important valuation, risk, and accounting outcomes that are less well understood.

This course provides delegates with an invaluable opportunity to understand Sukuk across a range of inter-related financial disciplines. By taking a multi-disciplinary approach to the course, delegates are given an opportunity to not only complement and expand upon their existing knowledge of Sukuk, but to achieve a wider appreciation of why and how, Sukuk are viewed differently by other key stake holders in the Sukuk market, for example ratings analysts, investors, and origination teams.

The course will include a high level of interactive discussion, analysis of case studies and thorough instruction in the treatment of Sukuk for structuring, valuation, risk management, and accounting purposes. Knowledge gained from the course is directly applicable in practice.

KEY LEARNING OBJECTIVES

By the end of this course delegates will be able to:

Identify the essentials of Sukuk structuring principles
Apply analytic methodologies for the pricing and valuation of Sukuk based on the actual risks embedded within Sukuk structures
Evaluate the various risks in Sukuk and examine how they are mitigated in practice
Estimate the financial accounting and capital adequacy treatment of Sukuk, including IFRS9 and AAOIFI standards for both Sukuk issuer and investors
Analyze real-life case studies and examples
Formulate two Sukuk instruments for hands-on practice

Seminar Agenda

Day 1: Structuring and Origination
Day 2: Valuation, Risk and Accounting

Day 1: Structuring and Origination

Overview of Sukuk

What Sukuk are and what Sukuk are not
How are Sukuk different t
conventional bonds?
Can Sukuk be traded? If so, what are the Shariah requirements?
Are Sukuk on- or off-balance sheet?
- Asset-backed Sukuk
- Asset-based Sukuk

Sukuk Origination

Securitization process based on type of underlying financial instrument
Fair valuation of Sukuk in the context of market demand and supply
Portfolio selection: how to choose underlying assets
- Investor demand
- De-risking the originator’s balance sheet
- Tradability requirements

Sukuk Structuring

Performance enhancements
- Irrevocable commitment to repurchase at maturity
- Liquidity facility
- Third party guarantees
Flexibility
- Embedded call and put options
- Rate resets and break clauses
Risk reduction
- Excess Spread
- Over-collateralization and tranching
- Role of Takaful
Pre-funding of Sukuk coupons

Case Studies:

Government of Dubai $5 billion 15-year Sukuk al-Ijarah trust certificates program
Dar Al- Arkan Real Estate Development $1.8 billion Sukuk al-Wakalah trust certificate program
Abu Dhabi Islamic Bank $1 billion Additional Tier 1 Capital trust certificates issued 2012 Rawabi Vallianz SAR 1 billion 5-year Sukuk Al-Musharakah due 2021
Saudi Electricity Company SAR 4.5 billion 40-year Sukuk Al-Istithmar due 2054
Kingdom Installment Company LLC $18 million Sukuk Al-Istisna’a issued 2006
Kingdom of Saudi Arabia $9 billion Mudarabah-Murabahah Sukuk issued 2017
Central Bank of Bahrain Sukuk Al-Salam Certificates
Ooredoo Tamweel Limited $2 billion 5-year Sukuk Al-Manafa’a trust certificate program

Structuring Exercises

Delegates will be given an opportunity to implement new skills learned on the course by working in groups to structure two Sukuk instruments which meet very different requirements for a company operating in the aviation industry, and an Islamic bank with a retail and a corporate banking business.

Day 2: Valuation, Risk and Accounting

Sukuk Valuation

Why Sukuk valuations are not aligned to risks which underlie Sukuk instruments
What steps are required to derive an accurate valuation of Sukuk?
- Valuing cash flows generated by underlying assets
- Incorporating risk substitution resulting from Sukuk structure

Case Study:Pricing Sukuk Al-Ijarah with real estate underlying assets and a repurchase undertaking

Risk Management of Sukuk

Risks Arising in Sukuk: Investor
- Murabahah Sukuk
- Salam Sukuk
- Ijarah Sukuk
- Istisnah Sukuk
- Mudarabah Sukuk
- Musharakah Sukuk
Risks Arising in Sukuk: Originator
- Market liquidity risk in traded Sukuk
- Funding liquidity risk and MTN programs which use Sukuk for Balance Sheet funding
- Liquidity facility: is it necessary?
Other Types of Risks in Sukuk
- Shariah non-compliance risk
- Accounting and de-recognition risks
- Operational risk
- Project completion risk
- Business risk

Capital Charges for Sukuk Instruments

Accounting for Sukuk

What are the accounting standards applicable to Sukuk?
What are the main issues in accounting for Sukuk?
How to account for Sukuk under IFRS9 and AAOIFI standards for both the Sukuk issuer and Sukuk investors

Course Conclusion

Where & When

Date: 28^th – 29^th August 2019
Venue: InterContinental Kuala Lumpur

Who Should Attend?

This course is designed to be of most benefit to:

CFOs, heads of finance and finance officers
CROs, risk managers, and risk analysts
Treasurers and treasury managers
Compliance and audit professionals
Capital market transaction origination and structuring teams
Fixed income portfolio and other fund managers
Ratings agency analysts
Regulators

Fee

Early bird : RM 2,700
Standard : RM3,000 per delegate
2 delegates (5% Discount) : RM2,850 per delegate
3 delegates (15% Discount) : RM2,550 per delegate
4 delegates (25% Discount) : RM2,250 per delegate
5 delegates (30% Discount) : RM2,100 per delegate

In-house/group training

If you are looking for an in-house training program or wish to send a group to an existing public program, kindly please contact Andrew Tebbutt at [email protected] or +603 2162 7802.
In-House Training Brochure

Manual Registration

Kindly complete the registration form and email to [email protected] or fax +603 2162 7810

For enquiries please contact:

Mathias Sosovele
Account Manager, REDmoney Seminars
[email protected]
Direct Line: +603 2162 7800 ext 25

Normariya Sariman
Account Manager, REDmoney Seminars
[email protected]
Direct Line: +603 2162 7800 ext 44

Ramesh Kalimuthu
Events Sales Director
[email protected]
Direct Line: +603 2162 7800 ext 65
Fax: +603 2162 7810

For sponsorship & speaking opportunities:

Andrew Tebbutt
Managing Director
[email protected]
Direct Line: +603 2162 7802

For marketing and media enquiries

Tiviaa James
Marketing Executive
[email protected]
Direct Line: +603 2162 7800 ext 62

Where & When

Date: 28^th – 29^th August 2019
Venue: InterContinental Kuala Lumpur

Who Should Attend?

This course is designed to be of most benefit to:

CFOs, heads of finance and finance officers
CROs, risk managers, and risk analysts
Treasurers and treasury managers
Compliance and audit professionals
Capital market transaction origination and structuring teams
Fixed income portfolio and other fund managers
Ratings agency analysts
Regulators

Fee

In-house/group training

If you are looking for an in-house training program or wish to send a group to an existing public program, kindly please contact Andrew Tebbutt at [email protected] or +603 2162 7802./p>

Manual Registration

Kindly complete the registration form and email to [email protected] or fax +603 2162 7810

About The Seminar

KEY LEARNING OBJECTIVES

By the end of this course delegates will be able to:

Identify the essentials of Sukuk structuring principles
Apply analytic methodologies for the pricing and valuation of Sukuk based on the actual risks embedded within Sukuk structures
Evaluate the various risks in Sukuk and examine how they are mitigated in practice
Estimate the financial accounting and capital adequacy treatment of Sukuk, including IFRS9 and AAOIFI standards for both Sukuk issuer and investors
Analyze real-life case studies and examples
Formulate two Sukuk instruments for hands-on practice

Seminar Agenda

Day 1: Structuring and Origination
Day 2: Valuation, Risk and Accounting

Day 1: Structuring and Origination

Overview of Sukuk

What Sukuk are and what Sukuk are not
How are Sukuk different t
conventional bonds?
Can Sukuk be traded? If so, what are the Shariah requirements?
Are Sukuk on- or off-balance sheet?
- Asset-backed Sukuk
- Asset-based Sukuk

Sukuk Origination

Securitization process based on type of underlying financial instrument
Fair valuation of Sukuk in the context of market demand and supply
Portfolio selection: how to choose underlying assets
- Investor demand
- De-risking the originator’s balance sheet
- Tradability requirements

Sukuk Structuring

Performance enhancements
- Irrevocable commitment to repurchase at maturity
- Liquidity facility
- Third party guarantees
Flexibility
- Embedded call and put options
- Rate resets and break clauses
Risk reduction
- Excess Spread
- Over-collateralization and tranching
- Role of Takaful
Pre-funding of Sukuk coupons

Case Studies:

Government of Dubai $5 billion 15-year Sukuk al-Ijarah trust certificates program
Dar Al- Arkan Real Estate Development $1.8 billion Sukuk al-Wakalah trust certificate program
Abu Dhabi Islamic Bank $1 billion Additional Tier 1 Capital trust certificates issued 2012 Rawabi Vallianz SAR 1 billion 5-year Sukuk Al-Musharakah due 2021
Saudi Electricity Company SAR 4.5 billion 40-year Sukuk Al-Istithmar due 2054
Kingdom Installment Company LLC $18 million Sukuk Al-Istisna’a issued 2006
Kingdom of Saudi Arabia $9 billion Mudarabah-Murabahah Sukuk issued 2017
Central Bank of Bahrain Sukuk Al-Salam Certificates
Ooredoo Tamweel Limited $2 billion 5-year Sukuk Al-Manafa’a trust certificate program

Structuring Exercises

Day 2: Valuation, Risk and Accounting

Sukuk Valuation

Why Sukuk valuations are not aligned to risks which underlie Sukuk instruments
What steps are required to derive an accurate valuation of Sukuk?
- Valuing cash flows generated by underlying assets
- Incorporating risk substitution resulting from Sukuk structure

Case Study:Pricing Sukuk Al-Ijarah with real estate underlying assets and a repurchase undertaking

Risk Management of Sukuk

Risks Arising in Sukuk: Investor
- Murabahah Sukuk
- Salam Sukuk
- Ijarah Sukuk
- Istisnah Sukuk
- Mudarabah Sukuk
- Musharakah Sukuk
Risks Arising in Sukuk: Originator
- Market liquidity risk in traded Sukuk
- Funding liquidity risk and MTN programs which use Sukuk for Balance Sheet funding
- Liquidity facility: is it necessary?
Other Types of Risks in Sukuk
- Shariah non-compliance risk
- Accounting and de-recognition risks
- Operational risk
- Project completion risk
- Business risk

Capital Charges for Sukuk Instruments

Accounting for Sukuk

What are the accounting standards applicable to Sukuk?
What are the main issues in accounting for Sukuk?
How to account for Sukuk under IFRS9 and AAOIFI standards for both the Sukuk issuer and Sukuk investors

Course Conclusion

Seminar Speaker

Dr. Ken Baldwin
Former Director Financial Policies & Planning, Islamic Development Bank

Dr. Ken Baldwin has worked as a practitioner in banking and finance for over 25 years in senior positions spanning the front and middle offices. Having graduated from Oxford University with a first-class honors degree in Physics in 1989, he qualified as a Chartered Accountant with PWC, before joining UBS, and then later Credit Suisse, in derivatives risk and control functions based in London.

He gained a PhD in the microeconomic theory of risk sharing in Islamic contracts, and worked in the GCC for 15 years in Islamic retail and Islamic investment banks. Whilst at Abu Dhabi Islamic Bank, Dr. Ken built an ALM analytic technology platform capable of capturing liquidity and interest rate risks inherent in the many varied Islamic financing products used at retail and corporate levels. He then moved to take up the position of MENA Regional Head of Quantitative Analysis for Citigroup. At Citicorp, Dr. Ken worked on structuring complex products used by Gulf-regional corporations to hedge FX and interest risks. Still residing in Bahrain, Dr. Ken then joined Investcorp, where he worked on the risk due diligence of corporate private equity and real estate private equity transactions and portfolio management. After leaving Investcorp, he set up the risk management department for venture capital bank, providing Basel III compliance and deal analysis for the bank. He then operationalized a new Islamic investment bank as its Chief Operating Officer for 3 years, before his most recent industry role at the Islamic Development Bank, where he set up and ran a new department tasked with developing Financial Policies and Planning underpinned by robust financial analytic tools and methodologies designed specifically for the IDB. Dr. Ken is currently a senior university lecturer in finance in the UK. He has published quantitative finance articles in peer-reviewed academic journals including the Journal of Risk, and during his earlier career, taught CFA and FRM professional certifications as a pastime for the Bahrain Institute of Banking and Finance.

Ken is a British Muslim.

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By completing, signing and sending us this registration form you are confirming delegate places on the seminar. You are also confi rming your understanding of our Booking, Payment and Cancellation Policy.

Cancellation: If delegates cannot attend the seminar replacement participants are always welcome. Otherwise delegates must request in writing (letter, fax or email) to cancel registration/s or transfer to a diff erent seminar at least 21 days before the seminar start date to be eligible for a refund, less a 5% administration fee. Delegates who cancel within 21 days of the seminar start date, or who do not attend, are liable to pay the full seminar fee and no refunds will be given. Instead fees will be converted to a IFN Seminars voucher equivalent to the original fee, less a 15% administration charge. This voucher is transferable within your organization and must be redeemed within one year of issue or become void. If a seminar is postponed for whatever reason delegate bookings will be automatically transferred to the new seminar date. Delegates who wish to transfer to a diff erent seminar will be subject to the same terms as above and charged the diff erence in seminar fees. No refunds or seminar vouchers will be issued for a no-show. Payment Terms: All seminars fees are to be received within 14 days of invoice date. REDmoney shall receive the full seminar fee with no deductions of any description. All telegraphic transfer fees, taxes and levies (domestic or otherwise) shall be borne by the sponsoring organization.

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For enquiries please contact:

Mathias Sosovele
Account Manager, REDmoney Seminars
[email protected]
Direct Line: +603 2162 7800 ext 25

Normariya Sariman
Account Manager, REDmoney Seminars
[email protected]
Direct Line: +603 2162 7800 ext 44

Ramesh Kalimuthu
Events Sales Director
[email protected]
Direct Line: +603 2162 7800 ext 65
Fax: +603 2162 7810

For sponsorship & speaking opportunities:

Andrew Tebbutt
Managing Director
[email protected]
Direct Line: +603 2162 7802

For marketing and media enquiries

Tiviaa James
Marketing Executive
[email protected]
Direct Line: +603 2162 7800 ext 62