Fitch assigns Tamweel Residential ABS CI (1) RMBS ratings

This is the first transaction of finances related to residential properties located within Dubai, one of the seven Emirates that make up the United Arab Emirates ('UAE'). 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 highest rating assigned to the notes does not exceed Fitch's internal view of the UAE's Country Ceiling. However, the transaction benefits from a foreign exchange 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 falls 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.

The 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 is 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.

The transaction uses a two-tier structure. While the issuer is an offshore entity formed under the laws of the Cayman Islands, Tamweel transferred 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').

Lessees were notified about the sale of properties to TPL and had some three months time to raise any objections against the transfer. A lack of reaction can be regarded as consent according to the transaction's counsel and final notifications about the actual transfer were sent in these instances. Further, the structure envisages that TPL is required to register as new owner of the property with the Dubai Land Department. However, as of today, some 54% of the properties in the pool are actually registered. This share of the portfolios was sold to TPL. Proceeds from the issuance relating to un-registered properties are withheld in an escrow account until registration is finalised or the account is released at the end of 2007 and used to redeem the notes.

The true sale of the assets to TPL is 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.