Fitch Rates Riyad Sukuk Limited's Trust Certificate Issuance Programme 'BBB+(EXP)'/'F2(EXP)'

The expected ratings are in line with Riyad's Long- and Short-Term Issuer Default Ratings (IDRs) of 'BBB+' and 'F2', respectively


Fitch Ratings - London: Fitch Ratings has assigned Riyad Bank's (Riyad) up to USD3 billion trust certificate issuance programme, housed under Riyad Sukuk Limited (RSL), 'BBB+(EXP)'/'F2(EXP)' ratings.

The expected ratings are in line with Riyad's Long- and Short-Term Issuer Default Ratings (IDRs) of 'BBB+' and 'F2', respectively. The IDRs of Riyad are driven by its standalone creditworthiness, as reflected by its 'bbb+' Viability Rating (VR), and also underpinned by a high probability of support from the Saudi authorities, if needed. Senior unsecured and subordinated unsecured certificates can be issued under the programme, however, the expected ratings apply only to senior unsecured certificates.

The assignment of final ratings is contingent upon receipt of final documents conforming to information already received by Fitch.

RSL, the issuer and trustee, is a special purpose vehicle (SPV), incorporated in the Cayman Islands as a trust for charitable purposes with shares being held by Maples FS Limited as share trustee. RSL was established solely to issue certificates (sukuk) under the programme and entering into the transactions contemplated by the transaction documents. A full list of ratings is at the end of this rating action commentary.


The trust certificate issuance programme's ratings are driven solely by Riyad's IDRs. This reflects Fitch's view that default of these senior unsecured obligations would reflect a default of Riyad in accordance with Fitch's rating definitions.

Fitch has given no consideration to any underlying assets or any collateral provided, as it believes that the issuer's ability to satisfy payments due on the certificates will ultimately depend on Riyad satisfying its unsecured payment obligations to the issuer under the transaction documents described in the offering circular.

In addition to Riyad's propensity to ensure repayment of the sukuk, in Fitch's view, Riyad would also be required to ensure full and timely repayment of RSL's obligations due to the bank's various roles and obligations under the sukuk structure and documentation, especially - but not limited - to the features below:

- Pursuant to the Servicing Agency Agreement, Riyad as servicing agent shall use amounts standing to the credit of the income collection account to pay to the transaction account an amount that is intended to be sufficient to fund the periodic distribution amount payable by the trustee under the certificates of the relevant series on the periodic distribution date. Fitch notes that Riyad 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.

- Upon the scheduled dissolution date, or the occurrence of a dissolution event or a certificateholder put option being exercised by one or more, Riyad will undertake to purchase the portfolio from the trustee at the applicable exercise price pursuant to a purchase undertaking issued by Riyad in favour of the trustee.

- The applicable exercise price shall be equal to the aggregate of: a) the outstanding face amount in the case of dissolution event or on scheduled dissolution date, the aggregate outstanding face amount of all the certificates; b) any accrued and unpaid periodic distribution amount relating to the applicable certificates; and c) an amount equal to the sum of any outstanding (i) amounts repayable in respect of any liquidity facility and (ii) service agency liabilities amounts.

- The payment obligations pertaining of Riyad (in any capacity) to the senior unsecured certificates 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 Riyad, present and future.

The intended transaction does not contain physical tangible real estate assets thus no total loss event were included.

The documentation includes a negative pledge provision that is binding on Riyad, as well as financial reporting obligations, Riyad events and cross acceleration clauses.

Certain aspects of the transaction will be governed by English law while others will be governed by the laws of Saudi Arabia. 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 Riyad 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.


The programme's ratings are sensitive to changes in Riyad's IDRs. The ratings may also be sensitive to changes to the roles and obligations of Riyad under the sukuk's structure and documents.

A downgrade of Riyad's IDRs would require a downgrade of its VR and a downward revision of its Support Rating Floor. Riyad's Support Rating and Support Rating Floor are sensitive to a change in the Saudi Arabian sovereign rating. As the Outlook on the latter is currently Stable, this is not our base case. A weaker propensity from the authorities to support the banking system would also lead to negative rating action, but this is unlikely in Fitch's view given the authorities' strong track record of supporting domestic banks.


The bank's Support Rating and Support Rating Floor are driven by potential support from Saudi authorities.

Link to Rating Actions: Rating Actions

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