The State Bank of Pakistan (SBP) on Wednesday announced auction of Government of Pakistan (GoP) Ijara Sukuk against Jinnah International Airport Karachi as the underlying Asset. Industry sources said that the federal government is likely to borrow over Rs 300 billion through upcoming three-year Ijara Sukuk auction to raise funds to meet the fiscal deficit and facilitate the Islamic Banking industry, which has an excess liquidity in the system.
According to SBP, the Jinnah International Airport has been identified as the proposed asset for issuance of the new GoP Ijarah Sukuk and valuation of the asset will be carried out by two Pakistan Banks Association''s (PBA) approved independent valuators, and the lower of the two valuations will be accepted as the sale price of the asset.
The maturity period of the Sukuk will be three years from the date of issue and the Sukuk will be issued in multiple of one hundred thousand rupees. The profit on the Sukuk will be paid bi-annually on the basis of rental rate announced by the SBP prior to start of each half year. Although the state bank has not announced any auction date, however the industry is expecting the auction will he held this month. Industry experts said that auction of Ijara Sukuk will provide some new investment opportunities to the Islamic Banking Industry to accommodate some Rs 225 to Rs 250 billion excess liquidity. Previously issued three-year GoP Ijara Sukuk against Jinnah International Airport Karachi amounting to Rs 233 expired on November 23, 2015.
According to DMMD Circular No 21 of 2015 issued on Wednesday, in accordance with provisions of the notification of the GoP Ijara Sukuk Rules, 2008, another GoP Ijara Sukuk will be issued and the Islamic Banking Department of State Bank of Pakistan will be responsible for monitoring of proper execution and 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.
As per transaction structure, the Investors will execute the Certificate Subscription Undertaking in favour of Pakistan Domestic Sukuk Company Limited, which will record the commitments of the investors for subscription to the Sukuk to be issued by PDSCL.
GoP (acting through ministry of Finance) will undertake to purchase the Leased Asset at the Exercise Price at maturity or upon a Lease Event of Default and Termination. Each time there is an additional requirement of funds by the GoP, the process will be repeated until the whole of the Asset is purchased by the Investors/Certificate Holders, it added.
As per the rules of Ijarah, all claims of ownership related expenses (including Major Maintenance and takaful expenses) during a Rental Period by the Service Agent shall be paid by the Agent or his appointed agent from the Rental income on behalf of Certificate Holders.