Moody's reviews Tamweel's A3/P-2 ratings, direction uncertain

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Paris, Moody's Investors Service today placed TamweelTamweel PJSC's A3 long-term and Prime-2 short-term issuer ratings on review with direction uncertain. The A3 rating on TamweelTamweel's senior unsecured debt -- namely its AED1.1 billion sukuk trust certificates due 2013 -- is also placed on review with direction uncertain. However, the ratings on the various tranches issued by Tamweel Residential ABS CI (1) Ltd. due 2037 remain unchanged: the ratings derived from this securitisation transaction are independent of TamweelTamweel's issuer credit ratings.

The rating action was triggered by the announcement that TamweelTamweel and its direct Dubai-based competitor Amlak FinanceAmlak Finance (not rated) would be merged under Real Estate Bank (REB)Real Estate Bank (REB), an institution fully owned by the Ministry of Finance of the United Arab Emirates (UAE) Federation. REBREB is itself also expected to be merged with Emirates Industrial Bank to form a larger combined entity to be named Emirates Development BankEmirates Development Bank.

The plan has received approval from all relevant federal government authorities. However, the transaction will need the approval of TamweelTamweel's shareholders, via an extraordinary general meeting expected to be held during the first quarter of 2009.

Under Moody's methodology for government-related issuers, its key rating inputs are: its Baseline Credit Assessment (BCA), which is currently12 (on a scale of 1 to 21, where 1 represents the lowest credit risk);(ii) the UAE federal government's Aa2 rating; (iii) high dependence; and(iv) high support from both the government of Dubai and that of the Federation.In Moody's view, the plan raises the possibility of two distinct scenarios, with different rating implications:

Scenario A: In the case where the merger with AmlakAmlak is indeed agreed upon by the current shareholders of both entities and the combined entity is controlled by REBREB, Moody's may decide to revise upward either the BCA or the support assumptions, or both. The BCA on the combined entity may benefit from: its larger scale, enhancing its franchise value and reducing the incremental cost of mortgage delivery; and (ii) Moody's expectation that it would have access to retail deposits, without necessarily having a full banking licence, which in turn would mean cheaper and more stable funding sources. Higher support assumptions for TamweelTamweel or the combined entity would reflect Moody's view that the group, in its new form, would become more systemically important to the UAE Federation.

Scenario B: Conversely, in the case where the merger plan under REBREB's umbrella is abandoned for any reason, TamweelTamweel is expected to remain controlled by its current shareholders, dominated by various entities related to the government of Dubai. Under such a scenario, both the BCA and support assumptions could be revised downward, leading to either a negative outlook or a downgrade. This would reflect Moody's opinion that: on a standalone basis, TamweelTamweel's access to affordable funding would be made even more difficult, which would ultimately put margins under pressure and reduce the company's capacity to build volumes, while the risks of a deterioration in asset quality might increase; and (ii) the Dubai's government capacity to support financial institutions facing pressure has decreased, in the wake of asset price declines and heightened systemic risks within Dubai's financial industry.

Given the current uncertainties as regards the timetable, current shareholders' approval and the conditions under which the plan would be effectively implemented, the direction attached to Moody's review of TamweelTamweel's A3/Prime-2 ratings remains uncertain. It is important to note that at this stage, TamweelTamweel's ratings remain unchanged, and that Moody's views scenario A as far more likely than scenario B.Moody's previous rating action on TamweelTamweel was the assignment of the issuer ratings at their current level in November 2007.TamweelTamweel is one of Dubai's leading mortgage lenders, and reported total assets of AED12.4 billion (USD3.4 billion) at 30 September 2008.

Copyright 2008, Moody's Investors Service, Inc. and/or its licensors and affiliates including Moody's Assurance Company, Inc. (together, "MOODY'S").

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For more information, lease contact:
Paris
Anouar Hassoune
VP - Senior Credit Officer
Financial Institutions Group
Moody's France S.A.
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Mardig Haladjian
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Moody's Investors Service Cyprus Limited
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© Press Release 2008