Stable outlook for Islamic Development Bank.Moody's Investors Service Moody's Investors Service
A leading global credit rating, research and risk analysis firm.
Moody's Investors Service
A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. has assigned a Aaa rating, with a stable outlook, to the Islamic Development Bank's US$ 1.5 billion Sukuk MTN MTN
A short-form for Medium Term Note.
Medium term notes issued by corporations, much like shorter-term commercial paper.
See medium-term note (MTN). program.
Under the proposed sukuk structure, trust certificates ("certificates") will be issued by IDB (ITS Data Bus) An interface between devices in an automobile endorsed by the Society of Automotive Engineers (SAE). Designed to fulfill the goal of Intelligent Transportation Systems (ITS), the ITS Data Bus enables engine diagnostic equipment, GPS navigation systems, Trust Services Limited, a Jersey-based finance vehicle.
The net proceeds Net Proceeds
The amount received after all costs are deducted from the sale of a piece of property or security.
In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the issue of such certificates will be used to purchase a portfolio of sukuk assets which may comprise ijara assets, murabaha contracts, istisna'a contracts and Islamic Development Bank's (IDB or the Bank) investments in equity and sukuk certificates.
The rating of the certificates is in line with the Aaa long-term foreign currency rating of the IDB's Ordinary Capital Resources.
Moody's regards the certificates as senior unsecured obligations, without any preference or priority, among all trust certificates of the same series and with all other present and future trust certificates.
The Bank's Aaa rating was assigned in June 2006.
The IDB is a multilateral development bank A multilateral development bank (MDB) is an institution, created by a group of countries, that provides financing and professional advising for the purpose of development. MDBs have large memberships including both developed donor countries and developing borrower countries. (MDB (Message-Driven Bean) An Enterprise JavaBean (EJB) generated by the Java Messaging Service. See EJB. ) based in Jeddah. Like other MDBs, it is governed solely by international law and is not subject to any particular sovereign jurisdiction.
Also, like other MDBs, the IDB benefits from preferred creditor preferred creditor
A creditor having priority to payment over one or more other classes of creditors. For example, holders of first mortgage bonds must be paid by the borrower before payments are made to holders of second mortgage bonds on the same status. Virtually all of the IDB's operational assets (equivalent to development loans for other MDBs) benefit from sovereign, government-owned bank or highly rated commercial bank guarantees.
The capital base of the Bank is strong.
The Bank's usable equity (paid-in capital Paid-in capital
Capital received from investors in exchange for stock, but not stock from capital generated from earnings or donated. This account includes capital stock and contributions of stockholders credited to accounts other than capital stock. plus total reserves) exceeds its total operational assets and equity investment, and the Bank's risk asset coverage ratios Asset Coverage Ratio
A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following: generally compare favorably with other MDBs.
Although the weighted average sovereign credit quality of the IDB's 56 member countries is lower than other Aaa-rated MDBs (the IDB has no Aaarated members), IDB members are strongly committed to the organization.
This was illustrated by a decision in May 2006 to double the Bank's subscribed capital and increase its paid-in capital by around 50% over a five-year period.
More recently, in June 2008, as a consequence to allow one more member country to have a permanent seat in the Board of Executive Directors, the Board of Governors voted to raise the Bank's subscribed capital by a further 7% and paid-up capital Paid-Up Capital
The total amount of shareholder capital that has been paid in full by shareholders.
Paid-up capital is essentially the portion of authorized stock that the company has issued and received payment for. by 10% (86% of the increase in paid-up capital is payable over 5 years and the rest during the following 5 years).
Despite a risky operating environment, inherent in its role as a development bank, the IDB's operational assets continue to perform well, with a very low level of impairment.
Moreover, the most risky portion of the Bank's operational assets (those extended to the poorest member countries on a concessional basis) will gradually be transferred to a new poverty reduction fund (the Islamic Solidarity Development Fund or ISDF ISDF International Sustainable Development Foundation
ISdF Institut de Sûreté de Fonctionnement
ISDF International Dance Sport Federation
ISDF International Space Defense Force (Battlezone game) ) that is financially separated from the Bank.
This should raise the Bank's profitability and enhance its risk profile.
The Bank enjoys a high level of liquidity and a very low level of debt, partly because of the Islamic, assetbased nature of its operations that is unique among MDBs.
The IDB periodically issues Sukuk (Islamic bonds) in part to help develop the global Islamic financial market.
The last rating action for the IDB was on June 30, 2006 when the Bank's Aaa rating was first assigned.
The Islamic Development Bank's ratings were assigned by evaluating factors relevant to the specific characteristics of multilateral development banks, reflecting in particular their dual nature as financial institutions and vehicles of international public policy.
MDB rating factors include an assessment of the stand-alone financial strength of the institution (in particular its level of capitalization, liquidity, its risk management framework and the quality of its assets), as well as the multiple forms of support (including in contractual form) provided by the governments that compose its membership.
These attributes were compared against other similar institutions and the IDB's ratings were calibrated cal·i·brate
tr.v. cal·i·brat·ed, cal·i·brat·ing, cal·i·brates
1. To check, adjust, or determine by comparison with a standard (the graduations of a quantitative measuring instrument): against Moody's global scale.
IDB's ratings are believed to be similar to other issuers presenting comparable credit risk.
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|Publication:||Saudi Economic Survey|
|Date:||Sep 6, 2009|
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