Islamic Finance Workshop Understanding Islamic Securitization, Sukuk

Structures and Documentation, Restructuring of Sukuk and Post Default Scenario

Islamic Finance Workshop Islamic Finance Workshop

Programme Overview Islamic Finance represents a way of conducting financial transactions that comply with Sharia (Islamic law). This industry is one of the fastest growing segments within the financial services industry, attracting considerable interest and participation from governments and major financial institutions from both within the Islamic world and beyond. Background After a temporary slowdown due to the recent economic recession, Sukuk market has again picked up momentum and is improving every passing day. Certain events during the last five years have also given birth to few new topics in the field of Sukuk, such as post-default scenario and Sukuk restructuring. In order to keep the pace at par with the changing dynamics of Sukuk market, Dar Al Sharia has joined hands with Malta Institute of Management to offer a complete and comprehensive Sukuk Workshop (the “Workshop”) for the very first time in Malta. This is an interactive Workshop which will cover both theory and practice with live examples from Sukuk issued by the Govt Related Entities (“GRE”) in certain jurisdictions, incorporating several innovative structures developed by Dar Al Sharia. For those who have little or no understanding about Islamic banking and finance, an optional one-day pre-workshop master class has also been arranged, which will explain in detail the ground rules in relation to Islamic banking and finance.

Who is this training for?

Conventional bankers who want to learn about Sukuk

Islamic Bankers and Consultants on Islamic Finance

Corporate Governance compliance officers

Lawyers involved in the documentation of Islamic financing transactions

Professionals working within the Islamic finance industry

University Students interested to work in the field of Islamic Finance

Anyone seeking a better understanding of Islamic Securitization and documentation besides the Islamic Finance world and its interactions with the Conventional Finance framework.

Workshop Aim & Methodology Workshop Aim

The aim of this workshop is to develop the essential knowledge required to understand Islamic financing and investment structures, one or more of which is used for issuing Sukuk. Understanding Islamic securitization and the underlying documentation is also explained in the course besides restructuring options for a Sukuk. Learning Outcomes At the conclusion of the workshop, participants will be able to:

Distinguish the characteristic features of Sukuk contracts and have a deep understanding of the different existing Sukuk contracts available and of the documents and drafting requirements related to these contracts.

Understand Islamic securitisation.

Understand the requirements to trade Sukuk, the risks involved and the ways to manage those risks.

Have a full understanding of the corporate governance issues concerning Sukuk.

Deal with the default of Sukuk contracts and take into consideration the pros and cons of restructuring.

Apply professional knowledge and skills to use Sukuk contracts in various financial transactions such as liquidity management, project finance and securitization.

Methodology This is a 3 days intensive and interactive workshop with presentations covering different uses of Sukuk, case studies, group discussions and latest in hybrid Sukuk structures.

Core Topics of the Workshop General overview of the instrument of Sukuk Functional comparison of Sukuk versus Conventional Bond How Islamic Securitization works Sukuk tradability, risks and risk mitigation, credit enhancement techniques Dealing with Sukuk default and the restructuring options Drafting requirements for Sukuk documentation Corporate Governance issues in Sukuk.

Who Should Attend the Workshop?

Lawyers involved in the documentation of Sukuk transactions Senior officials from rating agencies Fund managers investing in Sukuk Islamic bankers/practitioners Corporate governance compliance officers Professionals working in any segment of Islamic banking and finance industry University students interested to work in the field of Islamic finance Anyone seeking a better understanding of Sukuk and the Islamic Finance world in

comparison with conventional borrowing framework. Core Topics of the Master Class

Introduction to the Principles of Islamic Finance Investment based structures and products Sale based structures and products Hybrid structures and products

Who should attend the Master Class

Participants of the Workshop who have little or no understanding of Islamic banking and finance

Individuals other than the Participants of the Workshop interested in basic understanding of Islamic banking and finance and would like to understand different structures and products used in Islamic banking and finance

Workshop and Master Class dates Master Class 24th June Workshop 25-27th June Timing of the Workshop and Master Class 09.00 to 17.00 hours Registration Fee 3 Day Workshop including the One Day Master class 1400 EUR per delegate 1200 EUR on early bird registration up to end of May for MIM members 1300 EUR on early bird registration up to end of May Optional One-Day Master Class 550 EUR per delegate 450 EUR members of MIM early bird registration up to end of May 500 EUR non member early bird registrations up to end of May Location MFSA, Mriehel

Pre-Workshop Master Class

24 June 2013

09.00 – 10.45 Session A: Principles of Islamic Finance Islamic Sharia and sources of Islamic Fiqh (brief introduction) Prohibition of Riba and other elements Prohibition of other elements Relationship between ‘Risk’ and ‘Return’

10.45 – 11.00 Coffee/Tea and Networking Break 11.00 – 12.30 Session B: Currencies and Difference between Islamic and Conventional Banks Currency – concept and implications Differences between Islamic bank and Conventional bank

12.30 – 14.00 Lunch and Networking Break 14.00 – 14.45 Session C: Introduction to Islamic Contracts and their application in Islamic Finance Concept of Contract in Sharia Basic ingredients of a Contract Conditions of a Contract Valid, Void and Voidable Contracts in Sharia

14.45 – 15.30 Session D: Sale Based Structures Sale based contracts and their uses in Islamic finance

15.30 – 15.45 Coffee/Tea and Networking Break 15.45 – 17.00 Session E: Investment Based and Hybrid Structures Investment based contracts and their uses in Islamic finance Hybrid structures and their uses in Islamic Finance

17.30 – 17.15 Session E: Concluding Session Concluding remarks Course evaluation Award of Certificates

End of Pre-Workshop Master Class

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Sukuk Workshop

25 – 27 June 2013

Day 1 (25 June 2013) 09.00 – 09.30 Opening Addresses Formal Opening of the Workshop Opening Address by Rueben Buttigieg Overview of the Workshop

09.30 – 10.45 Session 1: Sukuk vs conventional bonds/ securitization and money markets

instruments Introduction to Sukuk and their Sharia basis Main differences between Sukuk and equity, bonds, securitization (conventional),

covered bonds Characteristics and documentation of Islamic capital markets instruments (sukuk

and securitization) 10.45 – 11.00 Coffee/Tea and Networking Break 11.00 – 12.45 Session 2: Fundamental Sharia requirements for the issuance of Sukuk Sukuk transaction’s structure, roles of parties involved and corporate structure

requirements What assets are required? A distinction between asset based and asset backed

Sukuk Islamic securitization vs. Sukuk – differences and similarities Brief discussion about the available and most common structures Innovation, factors driving innovation and documentation requirements

12.45 – 13.45 Lunch and Networking Break

13.45 – 14.30 Session 3: Interactive Group Discussion on the topic – Common Myths about Sukuk 14.30 – 16.00 Session 4: Sukuk structuring and documentation: A step by step guide Sukuk structures based on sale contracts such as Murabaha, Istisna, Salam,

Musawamah and Ijara Sukuk structures based on investment contracts such as Musharaka, Mudaraba,

Wakala Structuring workable Sukuk transactions: structure, drafting and documentation

issues – Practical guide Drafting recommendations (one size fits all approach) Issue of conformity of Sukuk documents to relevant jurisdiction’s laws regardless

Sharia compliance Sharia position on form and substance

16.00 – 16.15 Coffee/Tea and Networking Break 16.15 – 17.00 Session 5: Legal and regulatory issues concerning issuance of Sukuk and securitization What aspects need to be taken into account in relation to Sukuk and securitization? Sharia, legal and regulatory requirements in documentation and effects of non-

compliance

End of day 1 ***********

Day 2 (26 June 2013) 09.00 – 09.30 Review of Day 1 and Q&A 09.30 – 10.45 Session 6: Collaterals in Sukuk transactions Requirement for collaterals and risks covered: Sukuk vs conventional bonds – Case

studies on collaterals Position of AAOIFI on collaterals under investment based (Wakala, Mudaraba,

Musharaka), sale based (Murabaha, Istisna, Salam) and leasing based (Ijara) Sukuk structures

Documentation and drafting requirements 10.45 – 11.00 Coffee/Tea and Networking Break 11.00 – 11.45 Session 7: Monitoring the Sukuk transactions for Sharia compliance Guidelines of Accounting and Auditing Organization for Islamic Financial Institutions

(AAOIFI) Guidelines of Islamic Financial Services Board (IFSB) Guidelines of Islamic Fiqh Academy of Organization of Islamic Countries Guidelines of International Islamic Fiqh Academy

11.45 – 12.45 Session 8: Risks affecting investment Sukuk and securitization and allocation or mitigation of risk Identifying the risks inherent in Sukuk transactions and various Sharia techniques

for risk management Case studies of Sharia techniques, documentation and drafting requirements 12.45 – 13.45 Lunch and Networking Break

13.45 – 14.30 Session 9: Interactive Group Structuring Session using Sale Based Structures

14.30 – 15.15 Session 10: Various applications of Sukuk Project finance, Securitization, Sovereign funding, Restructuring of financial

obligations, Liquidity management, Refinancing, Other commercial applications 15:15 – 16.00 Session 11: Tradability of Sukuk What is a tradable Sukuk? Sharia requirements and AAOIFI clarifications for

tradable Sukuk Is there any distinction between documentation of tradable and non-tradable

Sukuk? Application of conventional listing rules and regulations to Islamic capital markets

instruments

16.00 -16.15 Coffee/Tea and Networking Break 16:15 – 17.30 Session 12: Redemption or winding up of Sukuk Instruments Mechanism for Redemption (liquidation under investment based structures or

exercise of option under the unilateral undertakings), documentation and drafting requirements

Events of Redemption and Sharia guidelines for Redemption: o Procuring undertakings from Mudarib, Wakil or managing partner o Procuring undertakings from lessee o Procuring undertakings from unrelated third parties

End of day 2 ***********

Day 3 (27 June 2013)

09.00 – 09.30 Review of Day 2 and Q&A 9.30 - 10.15 Session 13: Convertibility of Sukuk Types of convertible Sukuk, techniques for convertibility, and Sharia mechanism of

convertibility Documentation and drafting requirements

10.15 – 11.15 Session 14: Examining return or pricing in Sukuk and securitization transactions Distinction between various Sukuk contracts Sharia requirements in relation to return/pricing and payment under Sukuk

transactions Discussion on AAOIFI resolutions How to the reflect Sharia compliance in the documents? Sharia position on shortfall

11.15 – 11.30 Coffee/Tea and Networking Break 11.30 – 12.30 Session 15: Post default scenarios Sukukholders’ rights and remedies under Sharia (special focus on the event of

default) Obligations and liabilities of the trustee, agent and transaction administrators

under Sharia What will happen to Sukuk assets? Documentation and drafting requirements

12.30 – 13.30 Lunch and Networking Break

13.30 – 14.30 Session 16: Interactive Group Structuring Session using Investment and Hybrid

Structures 14.30 – 15.30 Session 17: Sukuk Restructuring Restructuring scenarios Mechanism of restructuring Documentation and drafting requirements of restructuring Case Studies

15.30 – 15.45 Coffee/Tea and Networking Break 15.45 – 16.30 Session 18: Corporate Governance Issues in Sukuk (IFSB) Operational requirements Recognition of risk transference Treatment for regulatory capital purposes and capital requirements for IIFS as

originators Treatment of liquidity facilities, credit risk mitigation, credit enhancement

16.30 – 16.45 Evaluation of the Course 16.45 – 17.00 Concluding Remarks and Distribution of Certificates

End of day 3 ***********