Moody's assigns (P)Aa2 to TDIC Sukuk Ltd.; outlook stable

The rating is provisional, subject to receipt of the final Offering Circular, underlying agreements and legal opinions related to the transaction documents.

Under the proposed structure, TSL will use the proceeds from the sale of the sukuk to obtain from TDIC the right to use and develop the land (Musataha), which is a defined plot on Saadiyat-Island, TDIC's key master development in Abu Dhabi. This will be governed by a Master Musataha Agreement. TSL leases the land that is subject to the Musataha to TDIC (Ijara), for which TDIC will pay a regular rent that equals to the periodic distribution amounts dispersed to the investors of the sukuk (certificate holders). Both the Musataha and Ijara Agreements are governed by Abu Dhabi law.

The Redemption Undertaking contains a change of control clause in the event the government of Abu Dhabi transfers its ownership to an entity that is not wholly-owned by the government or ceases to exercise direct or indirect control of TDIC. Other dissolution events include total loss, default on payment, and insolvency among other contractual obligations. A put option may also be granted to certificate holders and a call option to TDIC if agreed in the final terms.

The certificates under this programme rank at least pari passu with all other certificates issued under the programme. TDIC's payment obligations under this programme will rank pari-passu with TDIC's other unsecured and unsubordinated creditors. The terms and conditions of the sukuk include a negative pledge with certain carve-outs, a cross-default clause to TDIC and its subsidiaries' debt.

Moody's highlights that under Abu Dhabi law, which governs both the Musataha and the Ijara Agreements, a Musataha interest can only be created once registration in the land register at the Abu Dhabi Land Department has been completed. However, the Land Department currently does not maintain a register that allows registration of such an interest. In the case that a legal action is taken to the courts in the Emirate of Abu Dhabi, a local court may contest the validity of the Musataha interest. Moody's notes that TDIC has agreed in the Purchase Undertaking and Master Declaration of Trust to indemnify TSL for any and all obligations, liabilities and actual cost incurred in connection with any enforcement of the relevant undertakings.

Moody's rates TDIC in accordance with its Rating Methodology for "The Application of Joint Default Analysis to Government Related Issuers", published in April 2005 which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab.

Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

The last rating action on TDIC was on June 23, 2009 when Moody's assigned a provisional Aa2 rating with a stable outlook to the $3bn GMTN programme of TDIC.

Headquartered in Abu Dhabi, the capital of the UAE, TDIC is a 100% government-owned entity established in 2005. The main area of development is Abu Dhabi which comprises TDIC's largest project, Saadiyat Island. For the financial year 2008 TDIC recorded Dhs436m (ca. $119m) in revenues and reported a loss of Dhs369m (ca. $100m).

TDIC Sukuk Limited, based in the Cayman Islands, is a special purpose vehicle established in 2009 under which TDIC will issue shari'a-compliant sukuk under the programme.