Sharjah Islamic Bank's Sukuk Trust Certificates assigned 'BBB' preliminary rating

This is the first-ever rating assigned by Standard & Poor's on bank sukuk trust certificates.

The transaction involves a special-purpose company incorporated in accordance with the laws of the Cayman Islands, issuing rated "musharaka" (co-ownership) sukuk trust certificates. The proceeds of the sukuk will ultimately be used for general funding purposes of Sharjah Islamic Bank (SIB; BBB/Stable/A-2), which will sell a given percentage of a pool of assets to the issuer. These assets, originated, leased, and managed by SIB, will be co-owned by both SIB and the issuer. The rationale for this transaction is to allow SIB to raise funds in accordance with Sharia (Islamic principles).

The rating assigned to the trust certificates is preliminary, and based on draft documentation as of Aug. 17, 2006. Should final documentation differ substantially from the draft version, the rating on the sukuk trust certificates could be changed.

The 'BBB' rating on the floating sukuk trust certificates is based on the 'BBB' long-term counterparty credit rating on SIB. The rating on the trust certificates reflects the fact that, in the case where the rental payments from the co-owned assets are insufficient to meet the required periodic amounts payable to sukuk holders, SIB will provide the necessary support to the issuer, to make up any shortfall, and meet the issuer's obligations toward certificate holders. In addition, SIB will undertake irrevocably to purchase the issuer's interest in the co-owned assets at the maturity.

The ratings on SIB factor in the bank's strong financial performance, solid capitalization, and improving asset quality. The long-term rating also includes a one-notch uplift to reflect our belief that the government of Sharjah--SIB's largest single owner--would provide support if needed.

Preliminary rating assigned

Sharjah Islamic Bank

U.S. dollar floating-rate sukuk trust certificates due 2011

Rating: BBB