Abu Dhabi’s TDIC issues $1.45bn sukuk

Abu Dhabi’s Tourism Development & Investment Co has received high credit ratings from all three major credit ratings agencies for a US$1.45 billion Islamic bond issue.

Fitch Ratings and Standard & Poor’s rated the sukuk programme AA, whereas Moody’s assigned an Aa2 rating.

The ratings apply to TDIC Sukuk Ltd, a Cayman Islands-based special purpose vehicle, set up specifically for issuing trust certificates under the programme.

The expected rating for the programme is in line with TDIC’s senior unsecured debt rating for a $3 billion global medium term note programme, set up earlier this year.

S&P said in a note that, ‘although the Abu Dhabi government has not formally guaranteed TDIC’s liabilities, the company has a high-profile policy role in diversifying the Abu Dhabi economy through its real estate and tourism activities.

‘This, coupled with TDIC’s operational proximity to the Abu Dhabi government, leads Standard & Poor’s to conclude that the likelihood of extraordinary government support is almost certain,’ the ratings agency said.

The programme is structured around the grant and leaseback of rights to use and develop land parcels on Saadiyat Island. The trust certificates issued by TDIC Sukuk represent an undivided beneficial interest in these assets.

In Islam, the lending of money itself and the charging of interest or riba is prohibited.

The sukuk structure allows organisations to issue Shariah compliant financing instruments that are comparable to tradeable bonds.

TDIC will use the proceeds from the sukuk, which literally means certificates, for general corporate purposes.

The organisation is mandated by the government of Abu Dhabi with the development of infrastructure as well as cultural, hospitality, leisure, commercial and residential projects that enhance Abu Dhabi’s high-end tourism market.

S&P said the rating of the programme is supported ‘by the government’s very strong asset position, which provides significant financial flexibility; the country’s high level of political stability and wealth, underpinned by its rich resource endowment; and by policies that reinforce Abu Dhabi’s integration with the global economy.’