The KWD12.5 Million (US$44.4 million) YAAS Sukuk Istithmar Issuance was the first Shariah compliant issuance to be backed by securitized consumer-based instalment obligations. According to the deal’s lead arrangers, Rasameel, the deal is common in the conventional sphere, but is the first of its kind in the Islamic finance sector.
“Recognizing the need for the development of structured finance and securitization markets within the GCC region, Rasameel’s innovative model underlying the Issuance is intended to serve as an example where a high quality investment grade product was not only able to meet the increasing capital needs across the GCC, but also to develop the markets and exchanges where such products can be freely traded to create liquidity,” said the deal’s arrangers.
Yusuf A. Alghanim & Sons, W.L.L. (YAAS) is a leading home furnishing and electronics retailer based in Kuwait. The deal’s issuer, YAAS Instalments was a special purpose vehicle created to provide Shariah compliant consumer credit sale and services to its retail customers under the jurisprudence of Kuwaiti law.
The issuance comprised a KWD10 million (US$35.24 million) Class A Sukuk Istithmar certificate and a KWD2.5 million (US$8.81 million) Class B Sukuk Istithmar certificate. Each certificate represented an undivided beneficial ownership interest in the trust assets which are held on behalf of the trustee on trust for, and on behalf of, the holders of each certificate.
According to Rasameel, what makes the issuance innovative is: “The proceeds paid to the trustee by the holders of the certificates will be used by the trustee to refinance the funding provided by YAAS Warehouse to YAAS Instalments. The process involved the use of a Murabahah arrangement between the trustee and YAAS Warehouse, whereby YAAS Warehouse assigned to the Trustee the right to receive the economic benefit of the portfolio rights in satisfaction, payment and discharge of its obligations under the Murabahah arrangement, which was approved an acknowledged by YAAS Instalments.”