CBB International Sukuk Company's Trust Certificates assigned Preliminary 'A' Rating

The 'A' preliminary credit rating reflects information and legal opinion available as of February 19, 2008.

Subsequent information and legal opinion may result in the assignment of a final rating that differs from the preliminary rating.

Under this transaction, CBB International Sukuk Company will issue floating-rate trust certificates (sukuk al-ijara). The rating on the certificates is equal to, and is fully reliant on, the support of the Kingdom of Bahrain (A/Stable/A-1).

CBB International Sukuk Company is a special-purpose entity established for this transaction. It is solely owned by the Central Bank of Bahrain (A/Stable/A-1), which is rated on par with the sovereign. The equalization of the rating on the sukuk with the rating on the Kingdom of Bahrain is based on the ownership of CBB International Sukuk Company by the Central Bank of Bahrain and the willingness of the kingdom to develop the Islamic finance market by raising funds under Sharia-compliant terms. It is further supported by the strong incentive for the kingdom to treat its own obligations under this transaction pari passu with its other obligations, including rated conventional debt, and to consider the performance of the certificates as being equally important as the performance of its own rated debt. Further support is provided by the obligation of the kingdom to make lease rental and termination payments to the issuer that should at all times enable the issuer to make periodic distribution and principal redemption payments on the certificates.

The Kingdom of Bahrain has confirmed that all its payment obligations under the transaction documents (according to the terms of the sublease) are considered to be direct, unconditional, unsubordinated, unsecured, and general obligations of the government and will be backed by the full faith and credit of the Kingdom of Bahrain. Although governments may sometimes in a stress situation consider rent or lease obligations as subordinate to bonds or bank loans, in this case a default by the government on its obligations under this transaction would likely trigger a default on the certificates. Since the issuer is 100% owned by the Central Bank of Bahrain, Standard & Poor's considers that the government would indeed consider the performance of the trust certificates as being equally important as the performance of its directly issued conventional bonds.

The transaction structure includes an ijara head lease agreement between the Kingdom of Bahrain as head lessor and the issuer as lessee, and an ijara sublease agreement with the issuer as sublessor and the kingdom as lessee. The proceeds of the certificates will be used by the issuer to fund the advance payment to the Kingdom of Bahrain under the ijara head lease agreement. Periodic distribution payments to the certificate holders will be funded by the rent paid by the Kingdom of Bahrain to the issuer under the ijara sublease agreement. Finally, the principal repayment on the certificates will be fully funded from the termination payment by the Kingdom of Bahrain to the issuer under the ijara sublease agreement.