S&P rates Damac notes BB

Standard & Poor’s said it assigned a preliminary BB issue rating to the proposed U.S. dollar-denominated sukuk trust certificates to be issued by Alpha Star Holding II Ltd.

Alpha Star Holding II is a special purpose vehicle incorporated in Cayman Islands, which will enter into a $100 million sale and purchase agreement with group operating companies of Damac Real Estate Development Ltd.

On the closing date, 41% of the proceeds of the sukuk notes will be put toward a portfolio of Ijara (lease financing) agreements and the rest toward a Murabaha agreement. While the sukuk notes remain outstanding, at least 33% of the notes’ outstanding face value shall be held in the Ijara portfolio, S&P said.

The preliminary rating on the sukuk reflects the ratings on Damac since the proposed transaction fulfills the five conditions of the criteria for rating sukuk, the agency said.

Damac will provide sufficient and timely contractual obligations for the repayment of the principal amount, S&P said.

These obligations will rank pari passu with Damac’s other senior unsecured financial obligations, the agency added.

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