Fitch Ratings has assigned Sharjah Islamic Bank’s (SIB; the originator; ‘BBB+’/Stable/’F2’) USD1,500,000,000 trust certificate programme a final rating of ‘BBB+’. The issuing entity under the programme is SIB Sukuk Company III Limited (SIBIII).

The ratings are assigned to the programme and not to the certificates issued under the programme. There is no assurance that certificates issued under the programme will be assigned a rating, or that the rating assigned to a specific issue under the programme will have the same rating as the rating assigned to the programme.

SIBIII is a special purpose vehicle, incorporated in the Cayman Islands, solely to act as the issuer of the certificates (sukuk) and trustee for the certificate holders.

KEY RATING DRIVERS

The ‘BBB+’ rating assigned to the programme is driven solely by SIB’s Long-term Issuer Default Rating (IDR) of ‘BBB+’ as the Sukuk structure is viewed as an originator-backed/asset-based structure. The certificates’ ratings would therefore be sensitive and directly-linked to any change in SIB’s Long-term IDR. The originator backing is based on: i) SIB’s payment and performance obligations under the sukuk transaction documents ranking pari passu with SIB’s other future or present senior unsecured debt obligations; ii) SIB’s irrevocable undertaking to purchase the relevant sukuk assets from SIBIII on the scheduled or any earlier dissolution dates; and iii) on any periodic distribution date, if the returns generated from the sukuk assets are insufficient to cover the periodic distribution payments due, SIB may pay further amounts to SIBIII to remedy such shortfall via a liquidity facility. Fitch views the provision of a liquidity facility as an obligation of SIB, as failure to provide liquidity if required would lead to a payment default under the certificates and in the agency’s view that this would also constitute an event of default for SIB.

Fitch understands that certificate holders have a beneficial interest in the cash flows generated by the underlying assets, but do not have recourse to those assets, as such the sukuk are asset-based not asset-backed.

By assigning a rating to the issue, Fitch does not express an opinion on the Sukuk structure’s compliance with Shariah principles or whether the relevant transaction documents are enforceable under any applicable law, including, without limitation, Sharjah, Dubai International Financial Centre and UAE federal law.

RATING SENSITIVITIES:

The ‘BBB+’ rating of the trust certificate programme is equalised with the Long-term Issuer default rating of SIB, and is therefore highly sensitive to a rating action on SIB.

Established in 1975 as a conventional bank (previously known as National Bank of Sharjah), SIB converted into an Islamic bank in 2002. The government of Sharjah currently holds 31.3% of the bank’s shares (through two registered shareholdings of 27.4% and 3.9%) and has been a major shareholder since it was established. Kuwait Finance House (KFH) joined as a strategic investor (20%) upon conversion although it has limited involvement in SIB’s activities. The remaining shares are listed on the Abu Dhabi Securities Exchange.