Fitch rates Warba Sukuk limited's trust certificate issuance programme 'A+'/'F1'

Fitch Ratings-London: Fitch Ratings has assigned Warba Bank K.S.C.P.'s (WB) up to USD2 billion trust certificate issuance programme, housed under Warba Sukuk Limited (WSL), 'A+'/'F1' ratings.

The ratings are in line with WB's Long- and Short-Term Foreign-Currency Issuer Default Ratings (IDRs) of 'A+' and 'F1', respectively, and apply only to senior unsecured certificates issued under the programme.

WSL, the issuer and trustee, is a special purpose vehicle (SPV), incorporated in the Cayman Islands, solely to issue certificates (sukuk) under the programme. The trustee has been incorporated solely for the purpose of participating in the transactions contemplated by the transaction documents. A full list of ratings is at the end of this rating action commentary.

KEY RATING DRIVERS 
The trust certificate issuance programme's ratings are driven solely by WB's IDRs. This reflects Fitch's view that default of these senior unsecured obligations would reflect a default of WB 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 WB satisfying its unsecured payment obligations to the issuer under the transaction documents described in the prospectus.

In addition to WB's propensity to ensure repayment of the sukuk, in Fitch's view, WB would also be required to ensure full and timely repayment of WSL'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 Wakala agreement, WB as a Wakeel 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 WB 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 business day prior to the scheduled dissolution date, pursuant to a purchase undertaking, in respect of each series, WB shall be required to purchase all or part of the Wakala asset portfolio from the trustee, upon occurrence of a dissolution event, at the scheduled maturity date or upon exercise of a put option, at the relevant exercise price. Additionally, the aggregate amounts of deferred payment price then outstanding shall become immediately due and payable.

- The exercise price payable by WB 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 be equal to the aggregate of: (a) the aggregate outstanding face amount of the relevant certificates; plus (b) an amount equal to all accrued and unpaid periodic distribution amounts (if any) relating to the certificates plus (c) any other amounts payable on redemption of the certificates.

- The payment obligations of WB (in any capacity) under the transaction documents shall, at all times rank at least equally with all other unsecured and unsubordinated obligations of WB, present and future.

The documentation includes a negative pledge provision that is binding on WB, as well as financial reporting obligations, covenants, WB event and 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 Kuwaiti 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 WB 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 WB's IDRs. The ratings may also be sensitive to any changes to the roles and obligations of WB under the sukuk's structure and documents.

WB's IDRs, Support Rating and Support Rating Floor are potentially sensitive to a change in Fitch's assumptions around the Kuwaiti authorities' propensity or ability to provide timely support to the banking sector or WB. 

The rating actions are as follows: 

Warba Sukuk Limited's Trust Certificate Issuance Programme:
Long-term rating: assigned at 'A+'
Short-term rating: assigned at 'F1'

WB's ratings are as follows:
Long-Term Foreign-Currency IDR: 'A+'; Stable Outlook
Short-Term Foreign-Currency IDR: 'F1'
Viability Rating: 'bb-'
Support Rating: '1'
Support Rating Floor: 'A+'

Media Relations: Louisa Williams, London, Tel: +44 20 3530 2452, Email: louisa.williams@thefitchgroup.com 

Additional information is available on www.fitchratings.com 

Applicable Criteria 
Bank Rating Criteria (pub. 12 Oct 2018)
Short-Term Ratings Criteria (pub. 02 May 2019)
Sukuk Rating Criteria (pub. 22 Jul 2019)

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE AT HTTPS://WWW.FITCHRATINGS.COM/SITE/REGULATORY. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Louisa Williams
Director, Corporate Communications
FitchRatings
T: +44 (0) 20 3530 2452
louisa.williams@fitchratings.com 
@FitchRatings 

© Press Release 2019