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Moody's assigns definitive Baa2 rating to Emaar Malls Group and (P)Baa2 rating to EMG Sukuk Limited certificates

June 15, 2014



Moody's Investors Service has today assigned a

definitive Baa2 long term issuer rating to Emaar Malls Group LLC ("EMG").

Concurrently, Moody's has assigned a provisional (P)Baa2 rating to the

proposed issuance of trust certificates (or "sukuk') by EMG Sukuk Limited

("EMG Sukuk"), a special purpose vehicle of EMG. The outlook on the

rating is stable.

Moody's will remove the rating's provisional status upon the satisfactory

review of the final documentation.

RATINGS RATIONALE

Moody's considers the sukuk, which follows the structure of a "Wakala"

transaction, to be a senior unsecured obligation. The rating agency's

assignment of a provisional (P)Baa2 rating to the sukuk is in line with

EMG's issuer rating and reflects (1) the ultimate obligation of EMG to

ensure that the periodic distribution amount is always maintained; and

(2) the existence of a purchase undertaking, which implies that

certificate, or sukuk, holders ultimately rely on the creditworthiness

of EMG for repayment when the trust is dissolved. Certificate holders

have no security, lien or pledge over any of the purchased assets. Under

the structure, Emaar Malls Group LLC acts as obligor, servicing agent and

seller.

According to the terms of the sukuk, EMG will issue the securities

through EMG Sukuk. Upon issuance, the sukuk holders will pay the

proceeds of the transaction to EMG Sukuk, which will in turn pay an

equivalent amount to EMG under the purchase agreement for the purchased

Wakala assets. Sukuk holders will periodically earn an amount that

reflects the returns generated by the Wakala Portfolio.

Payment obligations under the various documents -- including the Service

Agency Agreement -- will be direct, unconditional, unsecured and general

obligations of EMG and rank at least pari passu with all other unsecured,

unsubordinated and general obligations of the company. At maturity or

upon a dissolution event, EMG is required, by means of the purchase

undertaking, to fully repay -- including any unpaid and accrued periodic

distribution amount -- the aggregate face value of the certificates/sukuk.

The purchase undertaking contains a change-of-control clause in the event

of an investor other than Emaar Properties PJSC owning, either directly

or indirectly, 50% or more of EMG's share capital. Other dissolution

events include total loss, default on payment, and insolvency among other

contractual obligations. The terms and conditions of the sukuk include a

negative pledge and a cross acceleration clause that captures material

subsidiaries with certain carve-outs.

The sale and purchase agreement and the sale/transfer agreement will be

governed by the laws of the emirate of Dubai and the federal laws of the

UAE where applicable, whereas the following will be subject to the

jurisdiction of the English courts: the purchase undertaking, the sale

undertaking and the service agency agreement. All obligations are assumed

to be legally valid, binding and enforceable. The provisional rating of

the proposed certificates assumes that the final transaction documents

will not be materially different from the draft legal documentation

reviewed by Moody's.

While Moody's does not opine on the transaction's compliance with Shari'ah

law, it would expect a recognised Shari'ah Board to examine the

structure and pronounce that the structure and the mechanism of the

transaction are acceptable within the principles of Shari'ah prior to

closing.

EMG's Baa2 rating reflects (i) the company's well-established position in

the retail leasing business; (ii) the high quality of the assets such as

Dubai Mall; and (iii) the stable recurring cash flows. The assigned

rating also takes into account EMG's concentration risks towards the

Emirate of Dubai and Dubai Mall, who contributes in excess of 80% of

total revenues.

The stable outlook on the rating reflects Moody's view that (i) EMG will

maintain a strong business profile by limiting development risk and

refraining from entering markets where the operating environment is

potentially more volatile; (ii) occupancy rates will remain healthy and

lease revenues will display an upward trend, as a result of economic

growth and increased tourism in Dubai; and (iii) EMG will maintain a

conservative financial policy and preserve a strong liquidity profile at

all times.


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Source: EMBIN (Emerging Markets Business Information News)


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