Financial Times Interview over my Research Note on Goldman Sachs’ Reverse Tawarruq Sukuk
The original research note that ignited the debate was published on the 1st of Dec (kindly follow the link)
http://bit.ly/ulykYj
I was asked by prospective investors to provide independent analysis over the controversial structure of GS sukuk. After destructuring the sukuk, it was clear to me it was financially engineered to act as Reverse Tawrruq (RT).
Ever since the Islamic finance came to existence, a combination of sukuk potentially based on RT is unheard of (which explains the overwhelming reaction of the industry when such analysis broke out).
FT
http://www.ft.com/intl/cms/s/0/7f42508a-2745-11e1-864f-00144feabdc0.html#
The Islamic Globe
http://www.theislamicglobe.com/enews/The_Islamic_Globe_No_43_071211.pdf
Asharq Awsat, the most influential & top selling newspaper in the Arab world
http://bit.ly/rqrq1n
EuroWeek, sister publication of EuroMoney, has run the story in its front page
http://bit.ly/s8cyaT
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FT: Goldman Runs into Sukuk Hurdle
By Tom Braithwaite in New York and David Oakley in London
Goldman Sachs is facing obstacles to the launch of its first Islamic bond, with some experts warning its structure might breach sharia law.
The bank announced in October that it would offer a $2bn sukuk, securities designed to comply with Islamic law forbidding usury, via a Cayman Islands-registered vehicle listed on the Irish Stock Exchange.
The exotic offering would be the first foray into the market for Goldman, which enlisted Dar Al Istithmar Limited, a UK-based Islamic finance consultancy, to advise it on the structure of the sukuk and check its compliance.
But other experts say the offering may flout the rules. Mohammed Khnifer, a Saudi Arabia-based sharia adviser, said there were at least three “flaws” in the structure that he believed would disqualify the offering from sharia compliance.
First, the prospectus suggested that underlying assets used in the sukuk could be sold to a third party; second that the funds raised could be directed to Goldman itself; and third that there was no guarantee the securities would trade at par. Any of those might breach the complex rules required to be compliant.
Lawyers who structure products to comply with Islamic law warn that, whatever the merits to the scholarly debate, investors may be deterred by the doubts. “Goldman can list this programme on the Irish Stock Exchange, but that does not mean they will get the buyers,” said one lawyer who specialises in the field. “They may well find there is not much demand because of the widespread doubts over the issue in the market.”
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Regards
Sukuk Structurer & Banker’s Academy External “Islamic Finance” Expert (US)
For Published Research Papers:
http://reading.academia.edu/MohammedKhnifer/Papers