FSCD
Circular No. 13 |
September 06, 2008 |
All Banks/DFIs/NBFIs
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Government
of Pakistan Ijara Sukuk |
The
notification of the Government of Pakistan Ijara Sukuk
Rules, 2008 (the “Rules”) is enclosed for
your information (Annexure “A”). Consequently,
the detailed instructions and guidelines regarding issuance
and other operational details of GOP Ijara sukuk are enclosed
as under:-
1. All commercial banks including Islamic Banks (and
Non-banks subjected to SLR and entitled to open current
account with SBP) will be eligible to open Subsidiary
General Ledger accounts (SGLA) with State Bank of Pakistan
for the Ijara Sukuk. Commercial Banks having Islamic
branches will have to maintain separate SGLA’s
to clearly distinguish between the holdings of the Islamic
branch and its conventional counterpart.
2.
All Islamic banks and commercial banks with Islamic
Branches will be designated as primary dealers for the
purpose of participating in the auction of GOP Ijara
Sukuk to be announced by the State Bank of Pakistan.
Islamic Branches will not be allowed to separately place
bids in the auction.
3. The Sukuk will be issued at face value.
4. GOP Ijara Sukuk will be sold via competitive auctions
held by State Bank of Pakistan in which participation
will be restricted to the above mentioned primary dealers.
5. As per the Rules, the maturity period of the first
Sukuk issue will be for three years from the date of
issue. The profit on the Sukuk shall be paid semi-annually
on the basis of rental rate announced by the State Bank
of Pakistan prior to start of each half year. The semi-annual
profit will be benchmarked against the latest weighted
average yield of the 6 month Market Treasury Bills determined
one day prior to the start of each 6 month Rental Period
(commencing from the issue date of Sukuk) and determined
in the same manner at the start of each half year. In
case the last held Market Treasury Bill auction the
6 month tenor is either rejected by the State Bank of
Pakistan or there is no participation from the market,
State Bank of Pakistan will use the 6 month tenor as
given on the Reuters PKRV page (121-180 days) as the
above benchmark determined one day prior to the start
of each 6 month rental period.
6. Primary Dealers will be required to place bids as
margin over / under the benchmark 6 month Treasury Bill
weighted average yield. Minimum Bid size will be PKR
100,000 and in multiples thereof. Primary Dealers will
be free to place multiple bids. Margin has to be specified
in terms of bps over / under the benchmark rate upto
a maximum of two decimals points.
7. State Bank of Pakistan will have the sole discretion
to accept / reject any bid without assigning any reason
thereof. The highest margin over the six month Treasury
Bill weighted average yield (at and below which SBP
decides to accept all bids) will apply uniformly to
all accepted bids. This margin will remain fixed over
the entire tenor of the Sukuk. This can be explained
by the following example:
GOP
Ijara Sukuk |
Required
amount: PKR 10,000 million |
Bid
No. |
Primary
Dealer |
Amount |
Commulative |
Profit
Rate |
1 |
Bank
A |
1,000 |
1,000 |
TBill
- 10.00 bps |
2 |
Bank
B |
3,000 |
4,000 |
TBill
- 5.00 bps |
3 |
Bank
C |
2,000 |
6,000 |
TBill
+ 0.00 bps |
4 |
Bank
D |
4,000 |
10,000 |
TBill
+5.00 bps |
5 |
Bank
E |
5,000 |
15,000 |
TBill
+10.00 bps |
6 |
Bank
F |
3,000 |
18,000 |
TBill
+ 15.00 bps |
7 |
Bank
G |
2,000 |
20,000 |
TBill
+ 20.00 bps |
a.
For example, the required amount is PKR 10 billion and
bids are received from seven banks totaling PKR 20 billion.
b. The primary dealers will be ranked and selected in
the competitive auction on the basis of lowest profit
rate. Banks A-D qualifies for the issue.
c. Accordingly cut off will be established at bid no.
4 and each bank A-D will be awarded the Sukuk at TBill
+ 5 bps.
8.
In order to ensure that there is no over concentration,
holding of any commercial bank including Islamic banks
cannot exceed 25% of the issue amount as of close of any
business day. In case of commercial banks with Islamic
branches this holding restriction will be applied on a
combined / amalgamated basis.
9. A Tender Notice inviting sealed bids from the primary
dealers would be broadcasted on SBP’s REUTERS page
SBPK16 / Newspapers and will give details of the auction
program.
10. All primary dealers are required to send their bids
as per required format. (Copy of Specimen Tender Form
enclosed as Annexure “B”).
11. The Auction result would be announced through SBP’s
REUTER Page SBPK17.
12. The legal structure of the Sukuk and the related documentation
is explained in Annexure “C”.
13. Successful bidders would be required to duly execute,
within one day of announcement of Auction result, a Certificate
Subscription Undertaking through their authorized signatories
at the premises of the State Bank of Pakistan Banking
Services Corporation (“SBP BSC”), Karachi
(copy of draft Certificate Subscription Undertaking enclosed
in Annexure “D”) to subscribe to the Sukuk
and deposit the requisite amount for settlement of the
accepted bids on the settlement date of the auction.
14. The settlement date will be the date of issue of the
Sukuk.
15. As mentioned in the Rules Ijara sukuk will be scripless
and held in the SGLA accounts of commercial banks. Sukuk
can be traded in the secondary markets and are transferrable
through SGLA. Primary dealers are free to sell Ijara sukuk
to eligible investors as described in the Rules. In such
cases all banks will be required to open IPS accounts
of their customers reflecting the customer holdings of
Ijara sukuk. In this regard, the current procedures applicable
for IPS accounts will also apply to that of Ijara sukuk.
16. The detailed procedures
covering all operational aspects and requisite forms are
available on SBP website.
Enclosed:
Annexure “A” –
Copy of Government of Pakistan Ijara Sukuk Rules
Annexure “B” –
Specimen Tender Form
Annexure “C” –
Structure and Documentation Brief
Annexure “D” –
Draft “Certificate Subscription Undertaking”
Annexure “E” –
Draft “Certificate Issuance Undertaking”
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Yours
Sincerely,
Sd/-
(Athar
Ghafoor)
Jr. Joint Director
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