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Capital Markets

Structured finance: Gulf securitization gets warm market welcome

Two MBS transactions have become the Gulf region’s first internationally rated securitizations.

Industry insiders have hailed the issuance of the first two internationally rated securitizations in the Gulf region as a starting shot for a Gulf-region structured credit market. The class A tranche of Tamweel’s $250 million of RMBS bonds, priced through Morgan Stanley and Standard Chartered in mid-July, was given a provisional rating of Aa2 by ratings agency Moody’s, and AA by Fitch. It is one of the world’s first Shariah-compliant securitizations, and the first RMBS in the Gulf. A smaller CMBS securitization of an office block in Dubai was priced a few days later via HSBC, its class A notes achieving a provisional rating of Aa3 from Moody’s.

The debt markets in the Middle East have previously been hampered by the excess liquidity derived from oil revenues. With the announcement early in July that Qatar Islamic Bank also intended to issue a Shariah–compliant MBS, however, securitization seems to be taking off in the Gulf. Indeed, sources say another potentially internationally rated transaction is under discussion, pending the successful sale of the Tamweel transaction.

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But is the future of securitization in the Gulf so certain? According to Khalid Howladar, senior analyst in structured finance at Moody’s, securitization has become more attractive in the Gulf thanks to a wider switch to credit following the downturns in the region’s equity markets over the past 18 months.

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