Fitch assigns Tamweel Residential ABS CI (1) RMBS expected ratings

All ratings have Stable Outlooks. The Class D notes are unrated. The final ratings are contingent on the receipt of the final documents conforming to information already received. Total issuance is expected to equal USD220m.

This is a debut transaction of finances related to residential properties located within the United Arab Emirates. It securitises lease payments that arise under Shar'iah-compliant, long-term real estate lease agreements. The lease agreements were initially originated by Tamweel PJSC, one of the major home finance companies within the UAE. The transaction uses a two-tier structure.

The highest rating assigned to the notes does not exceed Fitch's internal view of the Country Ceiling of the UAE. However, the transaction benefits from a FX hedge provided by Morgan Stanley (rated 'AA-' (AA minus)/Outlook Negative /'F1+'). Such risk could arise in case the currency peg between the AED and the USD that has been in place since 1980 would fall away or could no longer be maintained. Further, Standard Chartered (rated 'A+'/Outlook Stable/'F1') provides a liquidity facility in an initial amount of 5% of the notes balance available to cover certain payments due.

'Strong economic fundamentals distinguish the UAE and the Emirate of Dubai especially from more traditional emerging countries,' says Michael Hoelter, Director in Fitch's Emerging Markets Structured Finance team. 'However, the basis of its strength still stems from the heavy USD inflow linked to oil export activity.'

The expected ratings are based on the quality of the assets, the available credit enhancement, the underwriting and servicing capabilities of Tamweel, the integrity of the legal structure of the transaction, and the availability of back-up servicers, including Dubai Islamic Bank (Support rating '1'). The ratings address the ultimate payment of principal and payment of 'variable return' in line with the transaction documentation.

Initial credit enhancement of 16% for the Class A notes will be provided by subordination of the Class B notes (7.3%), the Class C notes (4.7%), the Class D notes (3.5%) and a reserve fund equating to 0.5% of the initial note balance.

While the issuer is an offshore entity formed under the laws of the Cayman Islands, Tamweel will transfer registered ownership to the properties as well as the rights related to the leases to an onshore asset-holding entity, Tamweel Properties (1) Limited ('TPL'). The latter is formed under the laws of the Dubai International Financial Centre ('DIFC').

Upon the transfer, TPL will be registered at the Dubai Land department as owner of the property. Lessees were notified in April 2007 about the intention of Tamweel to sell the properties to TPL. The true sale of the assets to TPL will be governed by UAE/Dubai and DIFC law. Transaction legal opinions stipulate that the mechanics of the true sale are enforceable, binding and valid under the relevant UAE/Dubai laws. In case foreign law was agreed upon by the contractual parties, the opinions state that an English arbitration award would be generally enforceable in the UAE.