Moody's assigns provisional (P)Ba1 to Ezdan's Sukuk Programme

04/05/2016 21:06 AST

Moody's Investors Service, ("Moody's") has today assigned a provisional (P)Ba1 senior unsecured MTN rating to the USD2.0 billion Trust Certificate Issuance Programme (the "Programme") of Ezdan Sukuk Company Limited (the "Issuer"), a special purpose vehicle established in the Cayman Islands by Ezdan Holding Group Q.S.C ("Ezdan").



RATINGS RATIONALE

The (P)Ba1 rating assigned to the Programme is at the same level as the Corporate Family Rating (CFR) of Ezdan (Ba1 stable), as the holders (the "Certificateholders") of the trust certificates issued under the Programme (the "Certificates") will (i) effectively be exposed to Ezdan's senior credit risk; (ii) not be exposed to the risk of performance of the portfolio assets relating to the Certificates; (iii) will not have any preferential claim or recourse over the relevant Trust Assets, or rights to cause any sale or disposition of such Trust Assets except as expressly provided under the Transaction Documents for the Programme; and (iv) only have rights against Ezdan, ranking pari passu with other senior unsecured obligations as provided in the Transaction Documents.

The alignment of the instrument rating with the CFR at Ba1 also reflects the lower proportion of secured debt to total assets, which was 43% as of year-end 2015, thus presenting excess collateral value.

A definitive rating will be assigned to drawdowns on this programme upon Moody's satisfactory review of the final terms and conditions and legal opinions at the time of issuance.

Moody's also notes that its sukuk rating does not express an opinion on the Programme's structure's compliance with Shari'ah law, and for this it refers to the decision provided by HSBC and Mashreq bank's respective Shari'ah Supervisory Committees.

The proceeds of the Certificates under the Programme will be used by the Issuer to acquire a portfolio of assets comprised of no more than 49 percent in Shari'a-compliant commodities (excluding gold and silver) and no less than 51 percent in wakala assets, mainly real estate assets. The portfolio will be managed by Ezdan as the agent for the provision of Wakala services on behalf of the Issuer (acting as Trustee for the Certificateholders). Ezdan will collect income against the relevant periodic distribution amounts due for each series. If there is a shortfall between the amounts collected and the aggregate periodic distribution amounts due, then Ezdan may pay further amounts to remedy such shortfall to avoid a dissolution event. Similarly, Ezdan is required to purchase from the Issuer the portfolio of assets at a predetermined price at dissolution irrespective of the performance of the underlying assets.

Ezdan's Ba1 corporate family rating (CFR) is underpinned by (1) its leadership position in the residential market in Qatar with an investment properties portfolio worth QAR36.9 billion (USD10.1 billion) as of 31 December 2015; (2) recurring income from a property portfolio mainly in the residential sector which is expected to grow over the medium term given macroeconomic fundamentals and shortage of supply in the market; and (3) substantial value in its equity portfolio which has a market value in excess of QAR9.6 billion and provides an additional source of recurring income and cash flows through dividends and acts as an alternative source of liquidity given that more than 90% of the investments in value are listed.

For more on this Click Here

Moody's