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• EPC based lease certificates are issued to finance the realization
of the relevant work for which the ALC shall be party to the
EPC contract as well.
Assets and rights included in the portfolio of an ALC cannot be
disposed of until the redemption of lease certificates, for any purpose
other than collateralization to the benefit of lease certificate owners,
even in the case of transfer of management or supervision of the ALC
to public authorities. Accordingly, its assets cannot be pledged or
attached, or be subject to interim injunction in favor of third parties or
attached even for the collection of public receivables, or included as
part of an estate in the case of bankruptcy. The ALC cannot conduct
any activities other than those related to the issuance of lease certifi-
cates.
Risk Management
Apart from financial risks, a lease certificate issuance may bear
operational risks in respect of the management of the rights and assets
that are subject to the lease certificate and regulatory risks depending
on the location of the issuance.
The Communiqué explicitly prohibits the attachment, pledge or
otherwise collateralization of the assets subject to sukuk in favor of
third parties in a manner that may be detrimental to the rights of the
certificate holders. Although this provision does mitigate a major legal
risk that may occur on the part of the investors, it is not clear which
party will bear the consequences. Operational risks are covered in
terms of collection and distribution of proceeds.
Another issue that bears importance is compliance with
Sharia
rules.
Sharia
rules are not applicable in Turkey and the Communiqué
naturally does not impose any obligations in this respect. However,
compliance with
Sharia
rules may be important especially for foreign
investors. As known, there is no uniformity or written set of rules
regarding the interpretation of Sharia rules. Different issuers may
adhere to different interpretations, some of them get consulting from
experts in the area, whereas others follow the interpretations of the
Islamic Financial Services Board and Accounting and Auditing
Organizations for Islamic Financial Institutions. These issues may be
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NEWSLETTER 2014