Fitch Ratings has assigned Sharjah Islamic Bank’s (SIB; the originator; ‘BBB+’/stable/’F2’) trust certificate programme an expected rating of ‘BBB+ (EXP)’. The issuing entity under the programme is SIB Sukuk Company III Limited (SIBIII).
The final ratings are contingent on the receipt of final documents conforming to the information previously received by Fitch. The ratings are assigned to the programme and not to the certificates issued under the programme. There is no assurance that certificates issued under the programme will be assigned a rating, or that the rating assigned to a specific issue under the programme will have the same rating as the rating assigned to the programme.
SIBIII is a special purpose vehicle, incorporated in the Cayman Islands, solely to act as the issuer of the certificates (sukuk) and trustee for the certificate holders.
The ‘BBB+ (EXP)’ rating assigned to the programme is driven solely by SIB’s Long-term Issuer Default Rating (IDR) of ‘BBB+’ as the Sukuk structure is viewed as an originator-backed/asset-based structure. The certificates’ ratings would therefore be sensitive and directly-linked to any change in SIB’s Long-term IDR.
The originator backing is based on: I) SIB’s payment and performance obligations under the sukuk transaction documents ranking pari passu with SIB’s other future or present senior unsecured debt obligations; ii) SIB’s irrevocable undertaking to purchase the relevant sukuk assets from SIBIII on the scheduled or any earlier dissolution dates ; and iii) on any periodic distribution date, if the returns generated from the sukuk assets are insufficient to cover the periodic distribution payments due, SIB may pay further amounts to SIBIII to remedy such shortfall via a liquidity facility. Fitch views the provision of a liquidity facility as an obligation of SIB, as failure to provide liquidity if required would lead to a payment default under the certificates and in the agency’s view that this would also constitute an event of default for SIB.
Fitch understands that certificate holders have a beneficial interest in the cash flows generated by the underlying assets, but do not have recourse to those assets, as such the sukuk are asset-based not asset-backed.
By assigning a rating to the issue, Fitch does not express an opinion on the Sukuk structure’s compliance with Shariah principles or whether the relevant transaction documents are enforceable under any applicable law, including, without limitation, Sharjah, Dubai International Financial Centre and UAE federal law.
The ‘BBB+ (EXP)’ rating of the trust certificate programme is equalised with SIB’s Long-term IDR, and is therefore highly sensitive to a rating action on SIB.