Moody's assigns (P)Baa2 rating to NIG's proposed Sukuk

The outlook is stable. The Sukuk Programme is expected to be launched following a road show subject to market conditions.

On 26th March 2007, Moody's assigned first time foreign and local currency issuer ratings of Baa2 to National Industries Group Holding Company S.A.K. (NIG), one of Kuwait's largest investment holding companies. Moody's regards any trust certificates issued under the Sukuk Programme as a senior unsecured obligation. Certificate holders have no security, lien or pledge over any of the Trust Assets.

The rating is provisional subject to receipt of the final Base Prospectus, the terms and conditions of which are not expected to change in any material way from the draft documents reviewed, as well as final legal opinions related to the Purchase Undertaking, the Sale Undertaking, the Master Mudaraba Agreement and the Trust Deed, all of which constitute vital legal documents in the creation of the Sukuk Programme.

According to the terms of the Sukuk Programme, NIGSL will issue the securities. Upon each issue, the certificate holders will pay subscription monies to NIGSL, which will invest in an unincorporated investment arrangement known as the mudaraba, pursuant to the Mudaraba Agreement. The agreement stipulates that NIG as the Mudarib will invest the capital in accordance with an Investment Plan that provides that such investments will be Sharia'ah compliant.

Certificate holders will earn a pre-determined profit percentage (Periodic Distribution Amount) from their participation in the Mudaraba Assets. If the profit distributable to NIGSL is greater than the relevant Periodic Distribution Amount, the Mudarib shall be entitled to such excess distributable profit for its own account by way of incentive fees for acting as Mudarib.

In case the profit distributable to NIGSL is insufficient for NIGSL to pay the relevant Periodic Distribution Amount, the Mudarib shall undertake to provide Sharia'ah compliant funding to ensure that such payments may be made. The Mudarib will be repaid such Sharia'ah compliant funding from any funds that may be available on the next succeeding Periodic Distribution Date.

NIG (as Obligor and Mudarib), NIGSL (as Issuer and Trustee) and Citicorp Trustee Company Limited as Delegate will enter into a Trust Deed, under which NIGSL declares a Trust over its beneficial interest in the Mudaraba Assets for the benefit of certificate holders.

The Trust Assets are NIGSL's rights, benefits and entitlements in and to the relevant Mudaraba Assets and each of the transaction documents (the Master Mudaraba Agreement, the Purchase Undertaking, the Sale Undertaking, the Trust Deed, the Agency Agreement and the Programme Agreement). The Trust Deed and all other agreements are governed by English Law.

Each certificate thus represents beneficial ownership in the Trust Assets held on trust by NIGSL, and will rank pari passu with other certificates.

Certificate holders have no recourse for the payment of any outstanding amount in respect of the Certificates against NIGSL or NIG, provided each fulfils all of its obligations under the relevant transaction documents.

Either at the pre-determined Dissolution Date of the Trust, or under an early Dissolution Event (such as standard Events of Default), NIGSL has the right to require NIG to purchase its beneficial interest in the Mudaraba Assets. This effectively unwinds the Trust and the purchase monies paid by NIG to NIGSL are used to repay the certificate holders, thus enforcing the senior unsecured nature of the transaction.

Moody's notes that whilst the transaction's terms and conditions are governed by English law, Kuwaiti courts may enforce according to their own principles in the event of dispute, although this is already factored into the underlying rating of NIG.

NIG, based in Kuwait City, is a publicly listed investment holding company, and one of the largest publicly traded companies in Kuwait (rated Aa3) with a market capitalisation of approximately USD 5.3 billion. Its business includes strategic and financial stakes in companies across Kuwait, the GCC and Asia, focusing primarily on building materials, specialist engineering, petrochemicals, financial services, utilities and oil & gas services.

NIGSL, registered in the Cayman Islands, is a special purpose company established for the sole purpose of issuing Trust Certificates, or Sukuk, on behalf of NIG.