Modern Sukuk S.A.O.C. – OR50m Sukuk – rating on Oman National Scale reaffirmed at ‘omBBB+’

April 19, 2014 11:27 am

Capital Intelligence (CI), the international credit rating agency, announced that it has reaffirmed the rating on the Oman National Scale of ‘omBBB+’ of the OR50m Sukuk issued by Modern Sukuk S.A.O.C. The Sukuk matures in October 2018.

The rating is supported by the almost fully complete (i.e. except for the serviced apartments) status of Phase 1 of the project and the fact that both offices and mall space are now nearly fully let on long term leases – providing an assured source of stable cash inflow. The main constraining factors on the rating of the Sukuk are the tight liquidity and high leverage during the construction period for Phase 2 of the project and ahead of a planned IPO in late 2016. While there is also some degree of uncertainty as to the timing of the receipt of the IPO proceeds which are intended to repay the Sukuk (future market conditions are by their very nature unpredictable), a fully let retail mall should provide a solid basis for Islamic financing and partial refinance of the Sukuk should this be necessary. The Outlook remains at ‘Stable’.

Also supporting the rating is the value of the mall itself, which is likely to increase over time. Demographic trends and changes in shopping habits in Oman have favoured mall space and rental rates, and occupancy levels have been firm at all operators. At the same time, competition is limited and while existing operators have been adding space, few new operators will be entering the market before the Sukuk is repaid as for this to happen, project(s) would have to already have been underway. There is therefore no reason to believe that Phase 2 of the project will face more difficult leasing market conditions than those for Phase 1.

The Obligor of the Sukuk is Tilal Development Company S.A.O.C. (TDC). TDC is a closed joint stock company which was established in November 2006. Its main project is the Tilal Complex. Currently the two largest shareholders are the Qatar Investment Authority (QIA) with 40% and Al Madina Real Estate Co. with 23.75%. Although the company is not listed on the Muscat Stock Exchange, it is registered with the exchanges and is traded on an OTC basis on the “Third Market’.


Primary Analyst
Rory Keelan
Senior Credit Analyst
Tel: +357 2534 300