OREANDA-NEWS. Fitch Ratings has assigned Malaysia's proposed US dollar-denominated sovereign global sukuk trust certificates, to be issued by Malaysia Sukuk Global Berhad (MSGB), an expected 'A-(EXP)' rating. The expected rating is in line with Malaysia's Long-Term Foreign Currency Issuer Default Rating (IDR) of 'A-', which has a Stable Outlook.

MSGB is the issuer and the trustee of the sukuk and it is a company incorporated in Malaysia to act as a financing vehicle for the government of Malaysia.

KEY RATING DRIVERS

The trust certificate issuance programme's rating is driven solely by Malaysia's IDR of 'A-'. This reflects Fitch's view that default of these senior unsecured obligations would reflect default of Malaysia in accordance with Fitch's rating definitions.

Fitch has not considered any underlying assets or collateral provided, as we believe that the issuer's ability to satisfy payments due on the certificates will ultimately depend on the Malaysian government satisfying its unsecured payment obligations to the issuer under the transaction documents described in the prospectus and other supplementary documents.

In addition to the Malaysian government's propensity to ensure repayment of the MSGB sukuk, in Fitch's view it would also be required to ensure full and timely repayment of MSGB's obligations due to the Malaysian government's various roles and obligations under the sukuk structure and documentation, especially - but not limited to - the features explained below:

- On or before the periodic payment date, the Malaysian government, as the wakeel, will pay an amount equal to the minimum sale price of the relevant vouchers into the reserve account or collection account. Where the wakala sukuk assets comprise lease assets, on or prior to each rental payment date, the Malaysian government as the lessee, will pay to the trustee an amount reflecting the rental due in respect of the lease assets. Amounts shall be used to pay the periodic distribution amounts payable by the trustee under the certificates and shall be applied by the trustee for that purpose and shall be sufficient to cover periodic distribution amounts.

- On the scheduled dissolution or following the occurrence of any dissolution event, the trustee will have the right under the purchase undertaking to require the Malaysian government to purchase and accept the transfer and conveyance of all of its interests, rights, benefits and entitlements in and to: (i) any vouchers owned by the trustee but unsold at that time; (ii) any shares; and, (iii) (where the wakala sukuk assets comprise lease assets,) the lease assets.

- The sukuk exercise price payable by the Malaysian government to the trustee will be used to fund the dissolution distribution amount payable by the trustee under the certificates.

- The dissolution distribution amount equals (i) the outstanding face amount of the certificates, (ii) any accrued but unpaid periodic distribution amounts and (iii) any additional dissolution distribution amount.

- Additionally, the Malaysian government will be required to pay any shortfall in Takaful/insurance proceeds and the dissolution distribution amount directly to the transaction account on the occurrence of the Total Loss Event.

- The payment obligations of the Malaysian government, under the lease agreement (if any) and under the wakala agreement, are and will be direct, unconditional, unsubordinated, unsecured and general obligations of the Malaysian government and at all times rank at least equally with all other unsecured and unsubordinated external public indebtedness of the Malaysian government.

The programme includes a negative pledge provision that is binding on the Malaysian government, as well as financial reporting obligations, covenants and Malaysia Event under the sukuk consideration (which includes default acceleration terms). The documentation does not contain a change of control clause.

Certain aspects of the transaction will be governed by English law while others will be governed by laws of Malaysia. Fitch does not express an opinion on whether the relevant transaction documents are enforceable under any applicable law. However, Fitch's rating on the certificates reflects the agency's belief that the Malaysian government would stand behind its obligations.

When assigning ratings to the programme and certificates to be issued under it, Fitch does not express an opinion on the programme's compliance with sharia principles. There is no assurance that notes issued in the future under the programme will be assigned a rating, or that the rating assigned to a specific issue under the programme will have the same rating as the programme rating.

RATING SENSITIVITIES
The rating will be sensitive to any changes in Malaysia's Long-Term Foreign-Currency IDR. The ratings may also be sensitive to any changes to the roles and obligations of Malaysia under the sukuk's structure and documents.