Hong Kong’s inaugural Sukuk issuance assigned provisional rating of ‘(P)Aa1’ by Moody’s HONG KONG: Scheduled to debut in September, Hong Kong’s maiden Sukuk issuance has been assigned a provisional rating of ‘(P)Aa1’ by Moody’s. The Special Administrative Region (SAR) passed its Sukuk bill earlier in March, with an aim to issue approximately US$500 million in Sukuk. The paper will be issued by Hong Kong Sukuk 2014, an SPV established for the purpose of the issuance. In a statement from Moody’s, the rating assigned to the certificates is at the same level as the long-term local-currency and foreign-currency issuer ratings of Hong Kong, as the Sukukholders will: (i) effectively be exposed to Hong Kongs senior unsecured credit risk; (ii) not be exposed to the risk of performance of the underlying assets relating to the certificates; (iii) have rights to the proceeds of payments from the government ranking “pari passu” with other senior unsecured obligations. According to Moody’s, Hong Kong’s financial position is among the strongest of any government rated by the firm. The SAR’s ‘Aa1’ government bond rating reflects a strong, competitive economy, very high institutional strength, very high government financial strength, and considerable resilience to shocks. Furthermore, Honk Kong also has a very large net international asset position with external assets exceeding liabilities by an amount equivalent to 280% of its gross domestic product at the end of 2013. Another factor supporting the rating is the strength of the banking system, which did not exhibit significant stress during the global financial crisis. Based on the Ijarah principle, proceeds from the Sukuk will be utilized by the issuer to purchase certain properties now owned by the government. Following the purchase, the SPV will enter into a lease agreement with the government. Subsequently, pursuant to the terms of the agreement, the government will periodically pay an amount sufficient to fund distributions payable by the issuer to the Sukukholders. At the end of the Sukuk term, the government will purchase the lease assets at the exercise price, thus providing the principal amount payable by the issuer to certificate holders.
Posted on: Thu, 28 Aug 2014 06:47:29 +0000
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