S&P rates Alpha Star III sukuk BB

S&P said it assigned its preliminary BB issue rating to the proposed dollar-denominated sukuk trust certificates to be issued by Alpha Star Holding III Ltd.

Incorporated in Cayman Islands, Alpha Star III is a special purpose vehicle of Damac Real Estate Development Ltd. (Damac; BB/stable/--).

On the closing date, Alpha Star III will enter into a sale and purchase agreement with group operating companies of Damac to invest roughly 40% of the proceeds of the sukuk notes 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 will be held in the Ijara portfolio.

Under the guarantee undertaking, S&P said Damac has undertaken, to make up any shortfall between the distribution amount (profit and principal) and the amounts collected from the underlying assets.

The proposed rating on the sukuk reflects the agency’s rating on Damac, because the proposed transaction fulfills the five conditions of S&P’s criteria for rating sukuk.

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