RPT-Fitch rates Al Hilal Bank's trust certificate issuance programme

Thu Sep 19, 2013 4:26am EDT

Sept 19 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has assigned Al Hilal Bank's (Al Hilal; 'A+'/Stable/'F1') USD2,500,000,000 trust certificate issuance programme an expected Long-term rating of 'A+(EXP)' and expected Short-term rating of 'F1(EXP)'. The issuing entity under the programme is AHB Sukuk Company Ltd. (AHB).

The 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.

AHB 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.

KEY RATING DRIVERS

The ratings assigned to the programme are driven solely by Al Hilal's Issuer Default Ratings (IDRs), as the sukuk structure is viewed as an originator-backed/asset-based structure. Sukuk issuance under the programme are senior unsecured obligations of Al Hilal, therefore the ratings are in line with the bank's IDRs.

The originator backing is based on: i) Al Hilal's payment and performance obligations under the sukuk transaction documents ranking pari passu with the bank's other future or present senior unsecured obligations; ii) Al Hilal's irrevocable undertaking to purchase the relevant sukuk assets from AHB on the scheduled or any earlier dissolution dates; and iii) should the returns generated from the sukuk assets exceed periodic distribution payments due, the excess amount will be credited accordingly to reserve accounts. In the event that the returns generated are insufficient to cover periodic payments due, the shortfall will be covered via these reserve facilities and/or a liquidity facility. Fitch views the provision of a liquidity facility as an obligation of Al Hilal, as failure to provide liquidity if required would lead to a payment default under the certificates, and in the agency's view this would also constitute an event of default for Al Hilal.

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 sharia principles or whether the relevant transaction documents are enforceable under any applicable law, including, without limitation, the laws of the Emirate of Abu Dhabi and UAE federal law.

RATING SENSITIVITIES:

The ratings of the trust certificate programme are equalised with the IDRs of Al Hilal, and are therefore highly sensitive to any rating action on Al Hilal. Established in Abu Dhabi in 2008, Al Hilal offers a wide range of sharia-compliant wholesale, retail, treasury and investment banking services. It is fully-owned by Abu Dhabi Investment Council, and is regulated by the Central Bank of the UAE.

The ratings of Al Hilal Bank are as follows:

Long-term IDR 'A+'; Stable Outlook

Short-term IDR 'F1'

Viability Rating 'bb-'

Support Rating '1'

Support Rating Floor 'A+'

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