The government is set to clear part of its debt to Social Security Organization by issuing up to 50 trillion rials ($1.1 billion) of debt securities, the first batch of which was issued on the capital market by Amin Investment Bank on Sunday.

The first batch comprised 10 trillion rials ($222.2 million) worth of one-year equity-based Ijarah sukuk bearing 20% interest, backed by Tamin Petroleum & Petrochemical Investment Company’s shares owned by SSO.

This is the first time this type of Islamic debt security is being introduced to the capital market. Ijarah sukuk are securities representing the ownership of well-defined assets tied up to a lease contract, the rent for which is the return payable to sukuk holders.

The twist here is the well-defined asset is the stake in TAPPICO owned by SSO’s investment arm, which will be eventually bought back by the government and transferred to Social Security Investment Company as the bonds mature.

The second batch will include three-year sukuk valued at 20 trillion rials ($444.4 million), according to Amin Investment Bank.

The government’s debt to SSO currently amounts to over 1.5 quadrillion rials (about $33 billion), the Persian daily Shargh reported.

Source:

2018, New Equity-Based Sukuk Makes Debut in Iran, Monday, March 12, p.1,<https://financialtribune.com>