Moody's Investors Service has assigned a Baa1 senior unsecured debt rating (outlook stable) to the $300 million sukuk issuance of Tamweel Funding III Ltd (the Issuer), established in the Cayman Islands, the ratings agency said in its website.
This issuance benefits from an unconditional and irrevocable guarantee from Tamweel PJSC's majority shareholder, Dubai Islamic Bank PJSC (DIB) rated Baa1.
This issuance benefits from a specific DIB guarantee hence the Baa1 rating assigned is at the same level as the long-term local-currency and foreign-currency Issuer ratings of DIB (Baa1). The programme allows for future issuances without a DIB guarantee, which would be rated at the (Baa3) programme level.
In this issuance, the sukuk certificate holders will
(i) effectively be exposed to Tamweel's and DIB's senior unsecured credit risk;
(ii) have no exposure to the performance risk of the sukuk assets relating to the certificates;
(iii) have no preferential claim or recourse over the sukuk assets, or rights to cause any sale or disposition of the sukuk assets except as expressly provided under the transaction documents; and
(iv) only have rights against Tamweel, and the guarantor DIB, ranking pari passu with their other unsecured obligations as provided in the transaction documents.
Moody's also notes that its sukuk rating does not express an opinion on the structure's compliance with Shari'ah law, and for this it refers to the opinion provided by Tamweel's Shari'ah supervisory board.
The proceeds of the sukuk certificates will be used by the Issuer to acquire an ownership interest in a portfolio of assets comprised primarily of real-estate Ijara assets, Istisna assets and/or other tangible Shari'ah compliant assets.
The assets will form part of Wakala and Mudaraba Portfolios which will be managed by Tamweel as Managing Agent and Mudarib, respectively on behalf of the Issuer (acting as the Trustee for the certificate holders).
Tamweel 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 Tamweel, as Managing Agent, may pay further amounts to remedy such shortfall to avoid a dissolution event.
The ratings of DIB (the guarantor for this issuance) are supported by (i) its D- standalone bank financial strength rating, which maps to Ba3 on the long-term rating scale; and (ii) Moody's assessment of a very high probability of systemic support in case of need, which leads to a five-notch uplift in the long-term ratings to Baa1.
The outlook on DIB's ratings is stable. A change in DIB's ratings or outlook will automatically be reflected in the guaranteed trust certificate ratings of the Issuer.
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