Purchase undertaking
A unilateral promise by the originator or obligor to buy the sukuk assets from the holders at maturity or on default.
A purchase undertaking is a unilateral promise, a wa'd, by the originator or obligor to buy the underlying assets from the sukuk trustee on a set date or on an event such as default. It is the main exit mechanism in many sukuk and determines how holders are repaid. IIFM includes a purchase undertaking among its standard sukuk al-ijarah templates, and the agreed exercise price is closely reviewed, particularly in partnership-based sukuk.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Wa'd (promise)A unilateral promise to do something in the future; it can be made binding and is used in hedging, sukuk and lease-to-own deals.Sukuk al-ijarahSukuk whose holders own leased assets and receive the rent paid by the lessee as their return.Sukuk al-musharakahSukuk whose holders are partners in a venture, sharing profit by agreed ratios and loss in proportion to capital.Asset-backed and asset-based sukukThe distinction between sukuk whose holders have real recourse to the assets and those relying mainly on the obligor's promise to pay.