Fitch assigns Tourism Development and Investment Company's Sukuk Programme expected 'AA' rating

TDIC Sukuk has been formed by Tourism Development & Investment Company (TDIC) as a special purpose vehicle for the sole purpose of issuing trust certificates under the programme. The expected rating for the programme is in line with TDIC's senior unsecured rating of 'AA'. TDIC's Long-term Issuer Default Rating (IDR) is 'AA' with a Stable Outlook and Short-term IDR 'F1+'.

The final rating on the programme is contingent upon Fitch receiving final documentation conforming materially to information already received (preliminary prospectus dated 14 September 2009).

Under the programme, which follows a grant and leaseback of rights to use and develop certain land parcels on Saadiyat Island (the sukuk assets), TDIC Sukuk will issue trust certificates representing an undivided beneficial interest in the sukuk assets. The proceeds from the sukuk issuance will be used by TDIC Sukuk to pay TDIC as consideration for the granting of the rights to use and develop the sukuk assets. TDIC Sukuk will then lease the sukuk assets to TDIC for rental payments which will be paid to TDIC Sukuk on each periodic distribution date. Each rental payment is intended to be sufficient to fund the corresponding periodic distribution amount payable by TDIC Sukuk with respect to the trust certificates.

Under the transaction documents, TDIC undertakes to purchase all of the certificate holder trustee's interest, rights, benefits and entitlements upon maturity or upon the occurrence of a dissolution event (which includes an event of default or breach of other obligations). It is this mechanism which has allowed Fitch to equate the credit risk of the programme with the existing senior unsecured risk of TDIC and hence assign the same rating to the programme.

Fitch notes the Sukuk trust certificates will rank equally with each other and will constitute direct, unconditional, unsubordinated and unsecured obligations of TDIC Sukuk. TDIC's payment obligations under the transaction documents will rank equally with all other unsecured obligations of TDIC.

The proceeds from the Sukuk will be utilised by TDIC for general corporate purposes. The terms and conditions of the programme documentation include a negative pledge with carve-outs for project finance, security interest pursuant to Sharia financing and also securitisations. There is a cap on the negative pledge carve-outs limiting secured debt to 15% of the book value of the consolidated total assets of TDIC and its subsidiaries. The programme also incorporates a noteholder put option, similar to the one under TDIC's current GMTN programme, should government ownership of TDIC fall below 100%. As is typical for such programmes, there are no financial covenants and no restrictions on asset disposals or additional indebtedness.

TDIC's objective, as set forth by the government of Abu Dhabi, is the high-profile implementation of the government's initiative to develop a diversified economy through its master development of infrastructure, cultural, hospitality, leisure, commercial and residential projects that enhance Abu Dhabi's high-end tourism market. TDIC's IDR and senior unsecured ratings have been aligned with Fitch's sovereign rating of Abu Dhabi ('AA'/'F1+'/Stable) in accordance with Fitch's parent/subsidiary methodology.