April 20, 2017 / 8:05 AM / 9 months ago

Fitch Rates Saudi Arabia's Sukuk 'A+'

(The following statement was released by the rating agency) HONG KONG, April 20 (Fitch) Fitch Ratings has assigned a final rating of 'A+' to Saudi Arabia's trust certificate programme and US dollar-denominated sovereign global certificates (sukuk) issued through KSA Sukuk Limited under the programme. The rating is in line with the expected rating assigned on 4 April 2017 and with Saudi Arabia's Long-Term Issuer Default Rating (IDR) of 'A+' with a Stable Outlook. KSA Sukuk Limited, registered in the Cayman Islands, is the issuer and trustee and has been incorporated solely for the purpose of the sukuk transaction. The sukuk is a hybrid mudaraba-murabaha structure. KEY RATING DRIVERS The sukuk issuance rating is driven solely by Saudi Arabia's Long-Term IDR, which stands at 'A+' with a Stable Outlook following a downgrade on 22 March 2017. The sukuk issuance rating is based on Fitch's view that a default of these senior unsecured obligations would reflect a default of Saudi Arabia in accordance with the agency's rating definition. Fitch has not considered any underlying assets or collateral provided, as we believe the issuer's ability to satisfy payments due on the certificates will ultimately depend on the Saudi government satisfying its unsecured payment obligations under the transaction documents described in the prospectus and other supplementary documents. In addition to the government's propensity to ensure repayment of the obligations of KSA Sukuk Limited, Fitch believes it would also be required to ensure full and timely repayment of KSA Sukuk Limited's obligations due to its roles and obligations under the sukuk structure and documentation, especially - but not limited to - the features below: - On each periodic distribution date, the deferred sale price under each subsequent murabaha transaction will be payable by Saudi Arabia as the purchaser, which will be sufficient to make payment of each periodic distribution amount payable under that series of trust certificates. - On the scheduled dissolution date, the deferred sale prices, due under the initial murabaha transaction and the then outstanding subsequent murabaha transaction, will become immediately due and payable and will be sufficient to fund the dissolution amount specified in the final terms and any due but unpaid periodic distribution amounts payable under that series of trust certificates. Fitch understands that the government of Saudi Arabia's payment obligations associated with the trust certificates are direct obligations of the Government of Saudi Arabia and rank pari passu with all other unsecured external indebtedness of the government of Saudi Arabia. The sukuk issuance includes a negative pledge provision that is binding on the government of Saudi Arabia, as well as financial reporting obligations, covenants, government event and cross acceleration terms with other external indebtedness. Certain aspects of the transaction will be governed by English law, while other aspects will be governed by the laws of Saudi Arabia. Fitch does not express an opinion on whether the relevant transaction documents are enforceable under any applicable law. However, Fitch's rating on the certificates reflects the agency's belief that the government would stand behind its obligations. Under the final terms, the Saudi Fund for Development is expected to purchase 5% of the issued tranches of trust certificates and hold such U.S. Retention Interest on an ongoing basis for so long as required by the U.S. Risk Retention Rules. Such retention obligation will commence as of the initial issue date. Sukuk rated under the programme are rated as originator-backed (or "asset-based"), which are based on the credit characteristics of the sukuk described in Fitch's Criteria for Rating Sukuk (published 16 August 2016). Fitch's approach to rating originator-backed sukuk structures is driven solely by the originator's rating (in this case Saudi Arabia), relying on the clarity and strength of the contractual documentation binding Saudi Arabia to the sukuk obligations, which is explained above. Fitch's Criteria for Rating Sukuk does not apply to "asset-backed" sukuk, which rely on underlying collateral and assets. Fitch does not typically regard a deal's risk retention structure as a credit factor. However, Fitch will continue to monitor the evolution of sukuk structures, including but not limited to credit risk retention, and will communicate the rationale and implications should our approach change. When assigning ratings to the sukuk issuance, Fitch does not express an opinion on its compliance with sharia principles. RATING SENSITIVITIES The rating is sensitive to changes in Saudi Arabia's Long-Term Foreign-Currency IDR. Contact: Primary Analyst Jan Friederich Senior Director +852 2263 9910 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Secondary Analyst Krisjanis Krustins Associate Director +852 2263 9831 Global Head Islamic Finance Bashar Al-Natoor Senior Director +971 4 424 1242 Committee Chairperson Shelly Shetty Senior Director +1 212 908 0324 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com; Rose Connolly, London, Tel: +44 203 530 1741, Email: rose.connolly@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Criteria for Rating Sukuk (pub. 16 Aug 2016) here Sovereign Rating Criteria (pub. 18 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below