Fitch Ratings has assigned Al Hilal Bank’s (Al Hilal; A+/Stable/F1) $2.5billon trust certificate issuance programme a final Long-term rating of A+ and a final Short-term rating of F1.
At the same time, Fitch has assigned Al Hilal’s USD500m senior unsecured fixed rate certificates (sukuk) issued under the programme a Long-term rating of ‘A+’. The issuing entity under the programme is AHB Sukuk Company Ltd. (AHB).
The ratings reflect receipt of documents for the programme conforming to the information previously received by Fitch. The certificates have a profit rate of 3.267% per annum and mature on 8 October 2018.
AHB is a special purpose vehicle, incorporated in the Cayman Islands, solely to act as the issuer of the certificates and trustee for the certificate holders.
The ratings assigned to the programme and the certificates 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 issued under the programme are senior unsecured obligations of Al Hilal, and therefore the ratings are equalised 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 in a statement said.
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.
The ratings of the trust certificate issuance programme and the certificates are highly sensitive to any rating action on Al Hilal.