JCR-VIS assigns rating to Basel 3 compliant Tier 1 Sukuk by Dubai Islamic Bank Pakistan Limited

Karachi, December 07, 2018 (PPI-OT): JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned preliminary rating of ‘A’ (Single A) to Dubai Islamic Bank Pakistan Limited’s (DIBPL) proposed Basel 3 compliant Tier-1 Sukuk. Outlook on the assigned rating is ‘Stable’. Rating will be finalized upon review of signed legal documents.

DIBPL is in the process of issuing privately placed/ OTC Listed, perpetual, unsecured, subordinated, non-cumulative and contingent convertible Shariah compliant Sukuk amounting up to Rs. 3.3b (inclusive of green shoe option of Rs. 300m). The issue proceeds will contribute towards the bank’s additional Tier-1 (ADT-1) capital and will be utilized towards enhancement of the bank’s business operations. DIBPL’s ADT-1 instrument will rank ahead of claims of ordinary shareholders but below the bank’s senior creditors, including depositors.

The assigned rating portrays the relative risk of the ADT-1 instrument wherein issuer has full discretion on coupon payments, profit servicing from only profits for the year and conversion feature in the event of pre-specified trigger events, lock-in clause and point of non-viability in terms of regulatory requirements. While the regulatory framework may not consider a missed coupon payment as a default; the credit rating methodology employed by JCR-VIS would treat such missed payments as an event of default. In normal course of business, JCR-VIS believes that chances of non-performance risk are considered remote.

JCR-VIS has assigned entity ratings of AA-/A-1 (Double A Minus/A-One) to DIBPL indicating high credit quality. The assigned ratings reflect the Bank’s sound asset quality indicators, strong and consistent profitability growth over the last three years and adequate liquidity and capitalization indicators. Ratings assigned to DIBPL incorporate sound profile of the sponsor, Dubai Islamic Bank (DIB), the largest Islamic bank operating in United Arab Emirates. DIB has been rated ‘A/A-1’ (Single A/A-One) on the international scale. Support from the parent has been witnessed in the past both in the form of financial assistance and technical knowledge transfer and JCR-VIS expects this support to continue going forward.

For more information, contact:
CFA
JCR-VIS Credit Rating Company Limited
VIS House, 128/C,
25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: sobia@jcrvis.com.pk

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