TDIC’s $1.45 Billion Sukuk Gets Favourable Ratings

ABU DHABI — Abu Dhabi Tourism Development & Investment Company, or TDIC’s, $1.45 billion sukuk programme is off to a good start, getting the nod of three major ratings agencies. Moody’s Investors Service has assigned a provisional Aa2 rating to TDIC’s Islamic bonds, while Fitch Ratings and Standard & Poor’s gave it an AA rating.

Published: Sat 3 Oct 2009, 10:51 PM

Last updated: Sun 5 Apr 2015, 9:54 PM

The ratings were assigned to TDIC Sukuk Ltd., a Cayman Islands-based special purpose vehicle set up for the programme. Proceeds from the sukuk issuance will be used to develop TDIC’s largest project, Saadiyat Island.

The ratings agencies said the TDIC sukuk has been equalised with those of the government of Abu Dhabi, which has sole ownership of the company through the Abu Dhabi Tourism Authority, or ADTA.

“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,” said Standard & Poor’s in a note.

This, coupled with TDIC’s operational proximity to the Abu Dhabi government, ensures “extraordinary government support is almost certain,” said Standard & Poors.

Current credit ratings of Abu Dhabi reflect the government’s very strong asset position, which provides significant financial flexibility.

Standard & Poors said however, that the ratings are constrained by the geopolitical risks that all sovereigns in the region face, the limited disclosure on the government’s assets, and increasing contingent liabilities arising from the banking system and the UAE’s public sector as a whole.

TDIC’s $3 billion global medium term note programme, set up earlier this year, was also assigned AA status by the three agencies. In August, TDIC tapped HSBC, Abu Dhabi Commercial Bank and Standard Chartered to arrange issuance of a benchmark Islamic bond between $500 million and $1 billion. TDIC is one of the largest property developers in Abu Dhabi in terms of land bank. The group started its operations in 2005 and develops projects on behalf of the government, aimed at enhancing Abu Dhabi’s tourism industry.

TDIC benefits from land grants and other subsidies from the government, which reduces the inherent speculative risk of property development.

The group also develops commercial projects and sells developed land to third parties. Recently, TDIC commisioned Al Jaber Building LLC, an Abu Dhabi-based company, to handle the construction of the 354-villa Saadiyat Beach Villas.

TDIC also awarded a contract to Hilalco to build the infrastructure relating to the project, which includes road works and utilities.

rocel@khaleejtimes.com