S&P assigns A- to Malaysia Sovereign Sukuk’s trust certificates

KUALA LUMPUR: Standard & Poor's Ratings Services has assigned its preliminary 'A-' issue rating to the proposed US dollar-denominated Sukuk trust certificates to be issued by Malaysia Sovereign Sukuk Bhd.

The ratings agency said on Monday Malaysia Sovereign Sukuk Bhd. is a special-purpose company incorporated in Malaysia for issuing sukuk trust certificates. 

“This issuer will enter into a Wakala agreement with the government of Malaysia (foreign currency A-/Stable/A-2; local currency A/Stable/A-1; axAAA/axA-1+). 

“Under this arrangement, the issuer will enter into an asset sale and purchase agreement for not less than 26% of the issued amount, a grant of rights to services agreement for no more than 26% of the issued amount, and Murabaha agreement 

(sale financing) agreement for not more than 48% of the issued amount with Malaysia,” said S&P.

It said the rating on the proposed sukuk trust certificates reflects the foreign currency rating on Malaysia as the transaction fulfills the five conditions of its criteria for rating sukuk.

“We assess as remote the risks that a total loss event jeopardises the full and timely repayments of the sukuk trust certificates. Our opinion is based on the unconditional obligations of Malaysia to make up any shortfall between the insurance proceeds (if any) and the principal repayments related to the Ijara contract under a total loss event scenario,” it said.