Fitch Ratings - London : Fitch Ratings has assigned GFH Financial Group BSC's (GFH) USD300 million 2025 certificates, issued through GFH Sukuk Company Limited (GFH SCL), a final rating of 'B'/'RR4'. The final rating is in line with the expected rating assigned on 13 January 2020 and with GFH's Long-Term Issuer Default Rating (IDR) of 'B'.
GFH SCL, the issuer and trustee, is a special purpose vehicle (SPV), incorporated in the Cayman Islands, as a trust for charitable purposes with share capital being held by Walkers Fiduciary Limited. GFH SCL was established solely to issue certificates (sukuk). The trustee has been incorporated solely for the purpose of participating in the transactions contemplated by the transaction documents.
KEY RATING DRIVERS
The US dollar certificates' ratings are driven solely by GFH's Long-Term IDR of 'B'. This reflects Fitch's view that default of these senior unsecured obligations would reflect the default of GFH in accordance with Fitch's rating definitions. The Recovery Rating of 'RR4' reflects Fitch's expectation of average recoveries in the event of a default.
Fitch has given no consideration to any underlying assets or any collateral provided, as Fitch believes that GFH SCL's ability to satisfy payments due on the certificates will ultimately depend on GFH satisfying its unsecured payment obligations to the issuer under the transaction documents described in the prospectus.
In addition to GFH's propensity to ensure repayment of the sukuk, in Fitch's view, GFH would also be required to ensure full and timely repayment of GFH SCL's obligations due to the bank's various roles and obligations under the sukuk structure and documentation, especially - but not limited - to the features explained below.
- On each periodic distribution date, GFH as the servicing agent will apply amounts standing to the credit of a collection account (comprising all revenues in respect of the Wakala portfolio, including rental payments (pursuant to the lease agreement) and payment of any profit amount (as defined in the Murabaha agreement) (together the Wakala portfolio revenues) as paid by GFH (acting in its relevant capacities under the lease agreement, the servicing agency agreement and the Murabaha agreement, as applicable, into the collection account)) in payment into the transaction account of an amount that is intended to be sufficient to fund the periodic distribution amount payable by the trustee under the certificates. Fitch notes that GFH can take other measures to ensure that there is no shortfall and that funding of the principal payment and the portfolio income is paid in full, and in a timely manner.
- On the scheduled dissolution date, the aggregate amounts of the deferred sale price then outstanding, if any, shall become immediately due and payable by GFH; and the trustee will have the right under the purchase undertaking to require GFH (in its capacity as obligor) to purchase all of its rights, benefits, entitlements, title and interests in, to and under the Wakala assets. The exercise price payable by GFH (acting in its capacity as obligor) to the trustee in respect of the Wakala assets, together with the aggregate amounts of the deferred sale price then outstanding, if any, are intended to fund the dissolution distribution amount payable by the trustee under the certificates.
- The payment obligations of GFH (in any capacity) under the transaction documents will be direct and unconditional, and shall at all times rank at least equally with all other unsecured and unsubordinated obligations of GFH, present and future.
The documentation includes a negative pledge provision that is binding on GFH, as well as financial reporting obligations, covenants, and a cross acceleration clause. The documentation does not contain a change-of-control clause.
Certain aspects of the transaction will be governed by English law while others will be governed by Bahraini law. 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 GFH would stand behind its obligations.
When assigning ratings to the certificates to be issued, Fitch does not express an opinion on certificates' compliance with sharia principles.
RATING SENSITIVITIES
The ratings are principally sensitive to changes in GFH's IDR. The ratings could also be sensitive to any changes to the roles and obligations of GFH under the sukuk's structure and documents.
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