Standard & Poor (S&P)'s Ratings Services has assigned its preliminary A- foreign currency senior unsecured debt rating to the upcoming Bahrain Monetary Agency (BMA) International Sukuk Company (BSC)'s planned issuance of $250 million floating-rate trust certificates (Ijar'a sukuk) maturing in 2009.
BSC is a special-purpose company with the single objective of participating in this transaction, fully owned by BMA, the central bank of the Kingdom of Bahrain. The preliminary A- rating on BSC's Ijar'a sukuk reflects S&P's assessment that the upcoming sukuk can be assimilated from a credit standpoint to an unconditional, unsubordinated, and general obligation of the Kingdom of Bahrain, ranking on a par with the Kingdom's conventional debt, such as its Eurobonds.
The single purpose of this transaction is to allow the government of Bahrain to raise budgetary funds on terms compliant with Islamic principles. Securing a rating on the sukuk identical to that on the Kingdom's conventional foreign currency obligations is accomplished through the sale and repurchase of Bahrain International Airport.
The transaction involves BSC issuing rated trust certificates (Sukuk), the proceeds of which will ultimately be used for general funding purposes by the government of Bahrain. BSC will purchase the airport from the Kingdom of Bahrain, acting through the MOFNE. BSC will declare a trust over part of the airport in favor of the certificate-holders.
The airport includes all buildings and all other fixtures forming part thereof at any time, in respect of which any costs and risks of loss or damage are paid for and borne by the government.
The airport will be leased by BSC to the MOFNE for a five-year period corresponding to the duration of the trust certificates. The lease rental payments from the government of the Kingdom of Bahrain to BSC will exactly match the periodic distribution payments payable on the trust certificates.
The lease rental payments will be calculated based on LIBOR and are paid in US dollars, the currency in which the trust certificates are denominated, thereby eliminating exchange rate risk. The net amount received by BSC is equal to the full amount owed by BSC to the
certificate-holders. There is, in effect, a grace period of 14 days, in which the lease rental payments can be paid.
The dissolution amount payable by the government of the Kingdom of Bahrain will be used to fund the principal that remains payable to certificate-holders at or prior to maturity. The repurchase price is denominated in US dollars.
BSC may issue additional trust certificates, also backed by lease rental payments from the MOFNE to the BSC. In the current legal documents, the government of Bahrain irrevocably undertakes to repurchase the airport at the aggregate amount of all outstanding trust certificates backed by the airport. — (menareport.com)
© 2004 Mena Report (www.menareport.com)
