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Moody's assigns Baa2 rating to Mazoon's sukuk

Moody's assigns Baa2 rating to Mazoon's sukuk
Moody's said that the negative outlook reflects the negative outlook of Oman's sovereign rating

Mubasher: Moody's Investors Service has assigned a Baa2 rating to the proposed senior unsecured sukuk certificates that will be issued by Mazoon Assets Company, according to a report issued on Monday.

Moody's has also assigned a Baa2 foreign currency long-term issuer rating to Mazoon Electricity Company that mirrors the local currency rating of the company, with a negative outlook.

The ratings agency said that the Baa2 rating assigned to the sukuk is at the same level as the long-term issuer rating of the company, as the Certificates holders in Moody's view will effectively be exposed to its senior unsecured credit risk, not be exposed to the risks relating to the trust assets, and will not have any preferential claim or recourse over the trust assets, or rights to cause any sale or disposition of the trust assets except as expressly provided under the transaction documents, which are governed by either English or Omani Law.

Moody's also noted that its rating of the sukuk does not express an opinion on the sukuk structure's compliance with shari'ah law, and for this it refers to the decision provided by the Shari'ah supervisory committees boards of the certificates arrangers.

The ratings are supported by the regulator's record of transparency and independence, the cost-recovery mechanisms of the regulatory framework, as well as the low business risk profile of the electricity distribution and supply activities and the companies' regional monopoly positions in Oman.

However, the report indicated that ratings remain constrained by the high capital investment programmes over at least the 2017-21 cycle, associated financing requirements and frequent access to third-party debt funding, and the shareholder distributions, albeit at fairly moderate levels.

The outlook on the Programme is aligned with the outlook of the company and reflects the negative outlook of Oman's sovereign rating, the report stated.