Islamic Finance 

MAF Sukuk Ltd.’s $600 Million Green Sukuk Rated ’BBB’

| 14 May, 2019

DUBAI (S&P Global Ratings) May 13, 2019--S&P Global Ratings today assigned its 'BBB' issue rating to the $600 million unsecured trust certificates issued by MAF Sukuk  Ltd.

MAF Sukuk  is a special-purpose vehicle  (SPV) that is incorporated in the Cayman Islands, with one outstanding sukuk series under the program. It is affiliated with Dubai-based property firm Majid Al Futtaim Holding LLC (MAFH; BBB/Stable/A-2), which guarantees the company's transactions.

The rating on the trust certificates reflects the rating on MAFH because the transaction fulfills the  five conditions of our criteria for rating sukuk (see "Methodology For Rating Sukuk," published Jan. 19, 2015, on RatingsDirect). The issuance is via a Wakala contract that comprises two components: a Murabaha contract (48.07%) and a sale-and-purchase agreement for real estate assets (51.93%).

The terms and conditions require a minimum of 34% of the sukuk proceeds be invested in a Wakala portfolio of assets, which include income-generating real estate assets or other Sharia-compliant tangible assets. A maximum of 66% of the proceeds can be used to purchase a commodity Murabaha investment to be sold to Majid Al Futtaim Properties (MAFP), MAFH's properties business unit, for a deferred sale price that includes the cost price of the commodities, a nominal profit, and,  if applicable, any commodity tax.

Under  the master trust deed, MAFH is required, among other obligations, to make up any shortfall between the exercise price,  the deferred sale price,  and the principal collections from the  underlying assets in case of a dissolution event, at a sufficient price to repay the sukuk holders. This price is equivalent to the aggregate face  value of the outstanding certificates, any accrued but unpaid periodic distributions, amounts repayable in respect of any liquidity facility, and any other amount payable by the trustee under the transaction documents.

Although the documentation mentions a risk of a total loss event (TLE), we view as remote the risk that a TLE will jeopardize the full and timely repayment of the sukuk. This is because any TLE would typically be mitigated by the guarantee provided by MAFH of full payment of principal and  accrued unpaid profit after such an event. MAFH has an obligation to ensure that the assets are  covered by insurance and to make up any shortfall between the insurance proceeds and principal amount, unless the company proves unequivocally that it has complied with its insurance obligations. Although such an exclusion might result in the residual exposure of investors to the underlying Wakala assets' risks, we consider the likelihood of a TLE occurring to be remote. Furthermore, we expect that MAFH's obligations to make up the value-restoration amount under the master trust deed will largely mitigate this risk.

We equalize our rating on the trust certificates with that on MAFH to incorporate our view that the  instruments show limited structural subordination to MAFH's existing obligations. We expect the company will use  the proceeds of the issuance for eligible green projects. In our view, the issuance will not cause MAFH's debt leverage ratios to deviate from our expectations for the issuer credit rating. To evaluate the certificates' structural subordination, we have applied our key credit factors for the real estate sector.


Related Criteria

-   Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019

-   General Criteria: Methodology For National And Regional Scale Credit Ratings, June 25, 2018

-   Criteria | Corporates | Industrials: Key Credit Factors For The Real Estate Industry, Feb. 26, 2018

-   General Criteria: Methodology And Assumptions: Assigning Equity Content To Hybrid Capital Instruments Issued By Corporate Entities And Other Issuers Not Subject To Prudential Regulation, Jan. 16, 2018

-   General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017

-   General Criteria: Guarantee Criteria, Oct. 21, 2016

-   General Criteria: Methodology For Rating  Sukuk, Jan. 19, 2015

-   Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014

-   Criteria - Corporates - Industrials: Key Credit Factors For The Leisure And Sports Industry, March  5, 2014

-   General Criteria: Group Rating  Methodology, Nov. 19, 2013

-   General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

-   Criteria | Corporates | Industrials: Key Credit Factors For The Retail And Restaurants Industry, Nov. 19, 2013

-   Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013

-   General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013

-   General Criteria: Methodology: Industry Risk, Nov. 19, 2013

-   General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012

-   General Criteria: Criteria Clarification On Hybrid Capital Step-Ups, Call Options, And Replacement Provisions, Oct. 22, 2012

-   Criteria | Financial Institutions | General: Methodology: Hybrid Capital Issue Features: Update On Dividend Stoppers, Look-Backs, And Pushers, Feb. 10, 2010

-   General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009

-   Criteria | Insurance | General: Hybrid Capital Handbook: September 2008 Edition,  Sept. 15, 2008


Related Research

-  MAF Sukuk  Ltd. Amended Sukuk  Certificate Program's 'BBB' Rating  Affirmed, Oct. 9, 2015


Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at for further information. Complete ratings information is available to subscribers of RatingsDirect at All ratings affected by this rating action can be found on S&P Global Ratings' public  website at Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow  7 (495) 783-4009.


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