Fitch Ratings has assigned Saudi Electricity Company's (SEC) proposed domestic Sukuk an expected 'AA-(EXP)' rating. The rating is in line with SEC's 'AA-' Long-term Issuer Default Rating (IDR) and senior unsecured rating. The Outlook for the Long-term IDR is Stable. The Sukuk will be issued on an unsecured and unsubordinated basis. The final rating assignment is contingent on the receipt of final documents conforming to information already reviewed. The expected rating is driven by SEC's IDR and senior unsecured rating of 'AA-', due to the Sukuk's structure, which Fitch expects to include the following features: 1) SEC's payment obligations under the Sukuk are direct, unsubordinated and unsecured obligations of SEC and the payment claims of the Sukuk holders against SEC under the Sukuk will, rank at least pari passu with the claims of all other unsecured and unsubordinated creditors of SEC , 2) SEC's undertaking to purchase the Sukuk assets from Sukuk holders on the maturity or any earlier dissolution dates, which as per the schedule equals 100 per cent of nominal amount of all Sukuk, 3) During the life of the Sukuk the price payable by SEC in respect of the Sukuk will be the sum of the aggregate face value of the certificates then outstanding (in addition to any periodic distribution amounts that have not been paid) covered by a servicing agency agreement, the purchase undertaking agreement and SEC's commitment under a top-up mechanism, and, 4) Fitch's rating for the certificates therefore reflects the agency's belief that SEC would stand behind its respective obligations under the documentation. Among other aspects, the Sukuk benefits from a negative pledge and a cross default clause. Proceeds of the issue will be used for general corporate purposes. The certificates are to be governed by KSA law.
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