Fitch upgrades Tamweel residential ABS CI (1) Ltd

Fitch Ratings has upgraded Tamweel Residential ABS CI (1) Ltd, including Class A (ISIN: XS0310218713): upgraded to ‘AAsf’ from ‘A+sf’ with outlook stable; Class B (ISIN: XS0310219521): upgraded to ‘AAsf’ from ‘BBB+sf’ and outlook stable and Class C (ISIN: XS0310219950): upgraded to ‘AAsf’ from ‘BBB-sf’ with outlook stable.

“The upgrades reflect the substantial level of credit enhancement (CE) available to the notes and the stable performance of the underlying assets. The upgrade is also driven by the upgrade of the Long-term Issuer Default Rating of the servicer and originator, Tamweel PJSC (Tamweel; ‘BBB+’/’F3’),” Fitch in a statement said.

Fitch said it does not maintain a specific public rating on the Emirate of Dubai, instead, in its analysis the agency took into consideration the Country Ceiling of ‘AA+’ for the United Arab Emirates.

“Since May 2012 the notes have been amortising sequentially, as their outstanding balance has fallen below 10% of the initial balance. As a result, the class A notes are amortising at a faster pace and they are expected to redeem in full by the end of the year, provided the current payment rate is maintained,” it added.

“The assets in the portfolio are Sharia-compliant property leases granted mainly to non-emirate nationals working in the United Arab Emirates. The notes funding the portfolio have already amortised to 7.7% ($16.1million) of the initial balance and the CE has increased accordingly to 86.8% for the class A notes, 80.8% for the class B notes and 77.0% for the class C notes. The structure of the deal envisages a fully funded reserve fund that equals 5.9% of the current note balance. Additionally, the structure also benefits from over-collateralisation that currently amounts to USD18.6m. Fitch deems the current credit protection available across the structure to be sufficient to withstand a high degree of losses and has therefore upgraded all of the tranches to ‘AAsf’, thereby reaching five-notch uplift from the servicer’s rating.”

“Since inception, the transaction has reported only one deemed default corresponding to Dh239000,” Fitch said. In Fitch’s view, the limited level of defaults is due to the nature of the lease contracts, which allow the lessees to terminate the contracts voluntarily without further payment obligations. As the property titles are with the originator, these are being sold or repurchased by Tamweel and the proceeds are then included in the available revenue. As of May 2012, the outstanding collateral pool totals 198 leases amounting to $33million at the current exchange rate.

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