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Press Release
14 Mar | Thursday
RAM Ratings assigns initial ratings to Alliance Islamic’s RM300 million CP Programme and RM2.5 billion Perpetual Sukuk Programme

RAM Ratings has assigned initial ratings (listed below) to Alliance Islamic Bank Berhad’s (Alliance Islamic or the Bank) proposed RM300 million Islamic Commercial Papers Programme and proposed RM2.5 billion Perpetual Sukuk Programme. Concurrently, we have reaffirmed the Bank’s A1/Stable/P1 financial institution ratings, which mirror that of its parent, Alliance Bank Malaysia Berhad (Alliance Bank or the Group), given its strategic role as the Group’s Islamic banking arm.
 

Programme Short-Term Rating
Proposed RM300 million Islamic Commercial Papers Programme P1
 
Programme Long-Term Rating and Outlook
Proposed RM2.5 billion Perpetual Sukuk Programme
  1. Senior Sukuk Murabahah*
  2. Tier-2 Sukuk Murabahah*
  3. Additional Tier-1 Capital Sukuk Wakalah*
 
A1/Stable
A2/Stable
BBB1/Stable

* subject to a combined limit of RM2.5 billion, with sub-limits of RM1.2 billion, RM800 million and RM500 million for the senior, Tier-2 and additional Tier-1 securities, respectively.
 
The Tier-2 Sukuk Murabahah (Tier-2 Sukuk) and Additional Tier-1 Capital Sukuk (AT-1 Sukuk) to be issued under the Proposed Perpetual Sukuk Programme are Basel III-compliant and will qualify as Tier-2 and additional Tier-1 capital, respectively. Both instruments have a loss absorption feature (through write-offs) linked to the occurrence of a non-viability event of Alliance Islamic or Alliance Bank and its subsidiaries. The AT-1 Sukuk also has a loss absorption feature that would be triggered if the common equity tier-1 (CET-1) capital ratio of Alliance Islamic (at entity or group level) or Alliance Bank (at group level) drops below 5.125%.
 
The A2 rating of the Tier-2 Sukuk indicates the subordination of the facility to the Bank’s senior unsecured obligations. The BBB1 rating of the AT-1 Sukuk reflects the securities’ subordinated ranking and discretionary distribution payments. Based on RAM’s rating methodology, Alliance Islamic’s capital buffer vis-à-vis the pre-specified trigger of 5.125% is assessed to be “high” (i.e. more than 300 bps), with its consolidated and entity-level CET-1 capital ratios standing at 11.6% and Alliance Bank’s consolidated CET-1 capital ratio of 13.3% as at end-December 2018. The Bank’s capital position is strong in relation to its risk profile and parental support is expected, if required.
 
 
 
Analytical contact
Tan Shu Xuan
(603) 7628 1165
shuxuan@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 

Date of release: 13 March 2019

 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 

Published by RAM Rating Services Berhad
ÓCopyright 2019 by RAM Rating Services Berhad

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