Ithmaar Bank B.S.C.'s Sukuk Al Wakala assigned 'BBB-' preliminary rating

The transaction involves Ithmaar Sukuk Company Ltd., a special-purpose vehicle incorporated in accordance with the laws of the Cayman Islands, issuing rated "wakala sukuk" (trust certificates, the underlying assets of which are selected by an appointed investment manager).

Ithmaar Sukuk Company Ltd. will enter into an investment management agreement with Ithmaar Bank (not rated) and will benefit from a guarantee provided by Shamil Bank of Bahrain (BBB-/Stable/A-3). The proceeds of the sukuk will be invested in Shamil Bank of Bahrain existing shares (33%), and in a broad range of Sharia-compliant assets selected by Ithmaar Bank, as "wakil" (investment manager) for a period of time corresponding to the duration of the sukuk, which is five years. These assets will be owned by Ithmaar Bank, the issuer, in trust for the holders of the sukuk, and managed by the bank according to the investment management agreement. The rationale for this sukuk issuance is to allow Ithmaar Bank to build its balance sheet.

The rating on the sukuk primarily reflects the fact that, in the case where the periodic payments from the underlying assets are insufficient to meet the required periodic amounts payable to sukuk holders, Ithmaar Bank and Shamil will provide the necessary liquidity to make up any shortfall and meet the issuer's obligations toward sukuk holders. Secondly, Shamil, as guarantor, will irrevocably and unconditionally agree to meet all the financial obligations of Ithmaar Bank, in a timely manner, under the provisions pertaining to the sukuk issuance.

The rating assigned to the sukuk is preliminary, and based on draft documentation. Should final documentation differ substantially from the draft version, the rating on the sukuk could be revised. This does not constitute a recommendation to buy, hold, or sell the certificates.