Fitch Ratings-Moscow/London: Fitch Ratings has affirmed FAB Sukuk Company Limited's Sukuk Trust Certificates Programme at 'AA-'/'F1+'. FAB Sukuk is the special purpose sukuk issuing vehicle of First Abu Dhabi Bank (FAB; AA-/Stable/F1+). The programme ratings are equalised with FAB's Long- and Short-Term Issuer Default Ratings (IDR). A full list of ratings is at the end of this rating action commentary.
The programme's ratings apply only to senior unsecured certificates issued under the programme, which rank pari passu with FAB's senior unsecured obligations. The programme's total size is USD2.5 billion.
FAB Sukuk, the issuer and trustee, is a special purpose vehicle incorporated in the Cayman Islands solely to issue sukuk certificates under the programme. The trustee has been incorporated solely for the purpose of participating in the transactions contemplated by the transaction documents.
On 15 January Fitch assigned an expected rating of 'AA-(EXP)' to the recently announced sukuk to be issued under the programme. The assignment of the final rating is contingent on the receipt of final documents materially conforming to information already reviewed.
KEY RATING DRIVERS
The trust certificate issuance programme's ratings are driven solely by FAB's IDRs. This reflects Fitch's view that default of these senior unsecured obligations would reflect a default of FAB in accordance with Fitch's rating definitions.
Fitch has given no consideration to any underlying assets or any collateral provided, as we believe that the issuer's ability to satisfy payments due on the certificates will ultimately depend on FAB satisfying its unsecured payment obligations to the issuer under the transaction documents described in the prospectus.
In addition to FAB's propensity to ensure repayment of the sukuk, in Fitch's view, FAB would also be required to ensure full and timely repayment of FAB Sukuk's obligations due to the bank's various roles and obligations under the sukuk structure and documentation, especially - but not limited - to the following features:
- On each wakala distribution determination date, the service agent will pay into the relevant transaction account amounts standing to the credit of the income collection account, which is intended to fund an amount equal to the aggregate of the periodic distribution amounts payable by the trustee under the certificates of the relevant series on the immediately following periodic distribution date. Fitch notes that FAB 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 any dissolution or default event, the aggregate amounts of deferred payment price then outstanding will become immediately due and payable; and the trustee will have the right under the purchase undertaking to require FAB to purchase all of its rights, title, interests, benefits and entitlements in, to and under wakala assets at the relevant exercise price.
- The exercise price payable by FAB to the trustee and the aggregate amounts of the deferred sale price then outstanding, are intended to fund the dissolution amount payable by the trustee under the certificates, which should equal: the sum of the face amounts then outstanding and the accrued and unpaid periodic distribution amounts on such certificates (if any) to the date of redemption, together with any amounts specified in the applicable final terms.
- FAB as a service agent under the service agency agreement in case of total loss or destruction of, or damage to the whole of the real estate assets forming part of wakala assets is obliged to replace damaged assets within 31 days to preserve wakala assets portfolio value, otherwise FAB should pay the total loss shortfall amount.
- FAB's payment obligations (in any capacity) under the transaction documents will at all times rank at least equally with all other unsecured and unsubordinated obligations of FAB, present and future.
The sukuk issuance includes a negative pledge provision, as well as financial reporting obligations, FAB event and cross-default terminology.
Certain aspects of the transaction will be governed by English law while others will be governed by Abu Dhabi, UAE and Cayman Islands 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 FAB 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 programme's ratings are sensitive to any changes in FAB's IDRs. The ratings may also be sensitive to any changes to the roles and obligations of FAB under the sukuk's structure and documents.
FAB's IDRs, Support Rating and Support Rating Floor are potentially sensitive to a change in Fitch's assumptions around the Abu Dhabi (and UAE) authorities' propensity or ability to provide timely support to the banking sector or FAB.
-Ends-
The rating actions are as follows:
FAB Sukuk Company Limited:
Trust certificate issuance programme: affirmed at 'AA-'/'F1+'
First Abu Dhabi Bank:
Long-Term IDR: 'AA-'; Stable Outlook; unaffected
Short-Term IDR: 'F1+'; unaffected
Viability Rating: 'a-'; unaffected
Support Rating: '1'; unaffected
Support Rating Floor: 'AA-'; unaffected
EMTN programme: 'AA-'/'F1+'; unaffected
ECP programme: 'F1+'; unaffected
Senior unsecured debt: 'AA-'/'F1+'; unaffected
Media Relations Contact: Louisa Williams, London, Tel: +44 20 3530 2452, Email: louisa.williams@fitchratings.com
Additional information is available on www.fitchratings.com
Applicable Criteria
Bank Rating Criteria (pub. 12 Oct 2018)
Sukuk Rating Criteria (pub. 25 Jul 2018)
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
Solicitation Status
Endorsement Policy
Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
