Fitch Ratings-London: Fitch Ratings has assigned UAE-based Emirates Development Bank's (EDB) USD3 billion Euro Medium-Term Note (EMTN) Programme a long-term rating of 'AA-' and short-term rating of 'F1+'.
The ratings are in line with EDB's Long- and Short-Term Issuer Default Ratings (IDR) of 'AA-' and 'F1+', respectively, and apply only to senior unsecured certificates issued under the programme.
All other notes that can be issued under the programme, such as subordinated notes, will be rated on a case-by-case basis. There is no assurance that all notes issued under the programme will be rated or that all rated notes will be aligned with the programme's ratings.
KEY RATING DRIVERS
SENIOR DEBT
The programme's ratings are in line with EDB's Long- and Short-Term IDRs, reflecting Fitch's view that the likelihood of default on the senior unsecured notes issued under this programme is the same as the likelihood of EDB's default.
Senior debt issued by EDB under its programme constitutes direct, unconditional and unsecured and unsubordinated obligations of the issuer and the bank, respectively, and will rank at least pari passu with all other outstanding unsecured and unsubordinated obligations of the issuer and the bank, respectively.
The documentation includes a change of control clause, a negative pledge provision with EDB, as well as financial reporting obligations, covenants and cross default acceleration clauses. The notes and any non-contractual obligations arising out of or in connection with the notes will be governed by, and shall be construed in accordance with, English law.
EDB's ratings reflect an extremely high probability of support from the UAE authorities in case of need. This reflects the sovereign's strong capacity to support the banking system and Fitch's expectation of high willingness from the authorities to support the banking sector.
The ratings also reflect Fitch's assessment of the probability of support for EDB itself, which considers the bank's important and clearly defined policy role in providing housing loans for UAE nationals, but also in supporting economic development, particularly through lending to SMEs in the UAE; the bank's 100% strategic federal government-ownership and oversight by the Ministry of Finance, EDB being incorporated through Federal Law Number 7; and the strong and ongoing record of the Ministry of Finance's capital support for EDB and subsequent low leverage at the bank.
RATING SENSITIVITIES
SENIOR DEBT
The programme's ratings are sensitive to changes in EDB's Long- and Short-Term IDRs, which in turn are sensitive to a reduction in the perceived ability or willingness of the UAE authorities to provide support to the bank. This could be indicated by a change in EDB's policy role, or a material reduction in government control of the bank. However, this is not our base case.
Media Relations Contact: Louisa Williams, London, Tel: +44 20 3530 2452, Email: louisa.williams@fitchratings.com
Additional information is available on www.fitchratings.com
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