Citicorp as Delegate for the above transaction posted a notice on the BSE today that at least 25% of certificateholders had voted to dissolve the trust. That in effect represents a sufficient vote to accelerate the maturity of the sukuk. That means the issuer is obligated to pay. As a shell company with no assets, the issuer will not be able to pay.
At that point, Saad's purchase obligation will be triggered and the debt will become a direct unsecured liability of Saad.
However, as pointed out in my earlier post, the certificateholders have no legal access to any real assets. The land being "rented" in this transaction remains legally registered in Mr. Al Sanea's name. So in effect they hold an unsecured obligation. That means they will join the ranks of other Saad unsecured creditors - a large group both in terms of numbers of creditors and amount of debt. That will enable them to take legal action against Saad.
So no guarantee of repayment.
One wrinkle, despite the vote, the Delegate does not have to take any action until it has been indemnified to its satisfaction. Citicorp advises in the notice that it is not so indemnified.
I suspect the issue is certficateholder agreement to defray the not inconsiderable legal expenses associated with Citicorp taking action. The issue is one of simple maths for the investors. Will their ultimate recovery net of legal costs be positive?
Posts
No comments:
Post a Comment