Moody's assigns (P)A1 rating to DEWA's proposed Dhs Sukuk

This proposed Sukuk transaction replaces a previously postponed transaction from November 2007, and as such Moody's has withdrawn its previously assigned rating from the earlier transaction.

The Sukuk rating, which is provisional subject to receipt of the final documentation and clean legal opinions, is equivalent to DEWA's A1 senior unsecured issuer rating, which Moody's assigned for the first time in October 2007.

DEWA plans to raise an undisclosed amount in local currency (UAE Dirhams) through the issuance of Shari'ah-compliant Ijara Sukuk Trust Certificates, which follow a sale-and-leaseback agreement of selected Trust Assets.

According to the structure of the transaction, DEWA will sell Trust Assets to DEWA Funding, which will finance these via Sukuk proceeds and subsequently lease these back to DEWA. DEWA will pay DEWA Funding rental proceeds which will be used to satisfy the regular Periodic Distribution Amounts payable to the Noteholders. The rental proceeds will at all times match the Periodic Distribution Amounts due to Noteholders.

Upon regular dissolution of the Sukuk, or at a certain Dissolution Event (such as standard events of default), DEWA undertakes to re-purchase the Trust Assets at an aggregate exercise price which is intended to repay Noteholders in full.

Each certificate will represent beneficial ownership in the Trust Assets and will rank pari passu with other certificates or unsecured obligations of the issuer and DEWA. Holders of the certificates have no recourse to any assets of the issuer or DEWA, and do not have security or any preferential claim over any of the Trust Assets or other assets.

Whilst the Purchase and Lease Agreements are governed by Dubai and UAE Law, all other documents, including the Purchase Undertaking, are governed by English Law. Moody's does not opine on the transaction's compliance with Shari'ah or any other governing law, and thus has taken the statements from the DIB Shari'ah Supervisory Board and Citi Islamic Investment Bank Shari'ah Board as confirmation of compliance.

Furthermore, Moody's notes that whilst the transaction's key terms and conditions are governed by English law, local courts may enforce according to their own principles in the event of dispute.

Moody's rating of the Sukuk is equivalent to DEWA's senior unsecured issuer rating, as Moody's views the transaction as being commensurate with a senior unsecured investment obligation that implies that Noteholders ultimately rely on the creditworthiness of DEWA for their return and principal repayment. DEWA must cover any amounts that DEWA Funding is unable to provide from lease rental payments to satisfy the Periodic Distribution Amounts; and the Purchase Undertaking implies that Noteholders rely on DEWA's ability to either repay or refinance the instrument at maturity.

DEWA Funding Limited, registered in the Cayman Islands, is a special purpose entity set up for the sole purpose of issuing Sukuk Trust Certificates on behalf of Dubai Electricity & Water Authority.

Dubai Electricity & Water Authority ('DEWA'), incorporated in Dubai in the United Arab Emirates (UAE), is the state-owned monopoly provider of electricity and water in Dubai, where it serves more than 400,000 customers. The company operates as a vertically integrated multi-utility, with business activities including electricity generation, transmission and distribution as well as water desalination and distribution.