A restructuring mechanism for sukuk in case of losing or distressed issuers or originators. A haircut involves agreement by sukuk holders to get early settlement of their investments in sukuk at less than face value, when the originator is in financial distress, leaving no cash flows from the underlying assets of sukuk. In which case, sukuk holders get less than the amount they invested, as sukuk approach their maturity date. Sukuk holders will lose the haircut and any profits that would have been made otherwise. In absence of sukuk holders’ agreement, no haircut may be carried out.
March 21, 2023
