Sukuk defaults picking up

You'll have to forgive me for my tardiness in posting this on the blog, but it's something that's central in the sukuk world these days: the question of how sukuk defaults will be handled.

We've all heard about Investment Dar's $100m sukuk default. Others are probably on the horizon. I've talked to a bunch of lawyers and bankers who deal with sukuk (and some of whom are dealing with sukuk defaults), and the consensus seems to be that while while there's some measure of clarity - most sukuk have been structured soundly - there's still a lot of uncertainty over how sukuk certificate holders will fit into a company's overall capital structure when it goes into a general default.

In part because of these unresolved issues, I've been hearing that negotiations over the restructuring of major pieces of debt, especially in Kuwait, are not going well. One thing's certain, though: the next generation of sukuk, lawyers say, will be much different from the current one.