Treasury authorizes banks for dollar-denominated sukuk issuance

The Turkish Ministry of Treasury and Finance has taken a new step as part of its 2025 external financing program. The Ministry has authorized Dubai Islamic Bank, ENBD, HSBC, Kuwait Finance House, and Standard Chartered to issue dollar-denominated lease certificates (sukuk) maturing in September 2030.

The sukuk issuance in question will be carried out in international capital markets. It was reported that the initial yield expectation is at the 7.25 percent level. This move stands out as part of Turkey's strategy to diversify its external financing sources.

The sukuk issuance, to be conducted through the authorized banks, will be shaped according to the demand from investors. This move by the Ministry of Treasury and Finance aims to both attract the interest of international investors and meet the country's financing needs.

WHAT IS SUKUK?

It refers to a security issued by an asset leasing company to provide financing for all kinds of assets and rights, allowing its holders to have a claim on the income generated from these assets or rights in proportion to their shares. 

Ziraat Katılım's website provides the following information regarding sukuk

Types and Conditions of Lease Certificates Regulated by the Communiqué on Lease Certificates

1. Ownership-based lease certificate (Ijara sukuk)

Ownership-based lease certificates are certificates issued to provide financing for assets and rights to be acquired from the originator by a Special Purpose Vehicle (SPV) to be leased to the originator or third parties, or to be managed on behalf of the SPV.

2. Management contract-based lease certificate (Wakala sukuk)

Management contract-based lease certificates are certificates issued for the purpose of transferring the income generated from the management of assets or rights belonging to the originator in favor of the SPV, including leasing them throughout the maturity period, within the framework of the contract provisions.

3. Trading-based lease certificate (Murabaha sukuk)

Trading-based lease certificates are certificates issued to provide financing for the purchase of assets or rights in transactions where an asset or right is purchased by the SPV and sold on a deferred payment basis to companies with the qualifications specified in the first paragraph of Article 12.

4. Partnership-based lease certificate (Mudaraba/Musharaka sukuk)

Partnership-based lease certificates are lease certificates issued by an Asset Leasing Company (VKŞ) for the purpose of participating in a joint venture.

• In partnership-based lease certificate issuances, where joint ventures funded exclusively by the capital provided by the VKŞ are financed, the management of the joint venture is carried out by the entrepreneur or a third party appointed by the entrepreneur.
  
  
• The profit-sharing ratio between the entrepreneur and the VKŞ to be derived from the joint venture, or the fixed fee to be received by the entrepreneur under a proxy agreement, is specified in the partnership agreement.
  
  
• The issuance amount of a partnership-based lease certificate cannot exceed 90% of the fair value determined in the valuation report prepared in accordance with Article 11 of the Communiqué on Lease Certificates.

5. Lease certificates based on construction contracts (Istisna sukuk)

Lease certificates based on construction contracts are certificates issued to ensure the completion of a work within the scope of a construction contract to which the VKŞ is a party in the capacity of the employer.

• In issuances under this article, the VKŞ becomes a party to the construction contract, acting as the employer on its own behalf and on behalf of the lease certificate holders.
• The VKŞ may subject the work to be produced to a direct sales contract, either by leasing it first or without leasing it. It is mandatory for the VKŞ to collect the entire sales price by the maturity date of the lease certificate and to make payments to the lease certificate holders.
• The issuance amount of the lease certificate based on the work contract cannot exceed 90% of the fair value determined in the valuation report prepared within the framework of Article 11.
• In cases where the work price is paid in advance by the Asset Leasing Company (VKŞ), it is mandatory for the contractor to provide a movable or immovable pledge or similar collateral in favor of the VKŞ to ensure the complete and timely completion of the work.