Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Rating Action:

Moody's assigns first-time issuer rating of A1/P-1 to the International Islamic Trade Finance Corporation, Outlook Stable

Global Credit Research - 26 Oct 2017

New York, October 26, 2017 -- Moody's Investors Service has today assigned a first-time long-term issuer rating of A1 to the International Islamic Trade Finance Corporation (ITFC). The outlook on the rating is stable. Moody's also assigned a first-time short-term issuer rating of P-1.

The key factors for ITFC's A1 rating are the following:

(1) 'Medium' assessment of ITFC's capital adequacy reflecting significant capital buffers, balanced againts high concentration levels and a relatively weak track record of asset quality, albeit mostly due to legacy exposures;

(2) 'High' assessment of ITFC's liquidity position, supported by prudent treasury investment practices and adequate liquidity management policies in anticipation of a moderate build-up of expected debt service requirements over the next three years;

(3) 'Medium' assessment of strength of member support driven by very high extraordinary support, balancing the lack of explicit contractual support in form of callable capital.

The A1 rating and the stable outlook take into account ITFC's planned moderate leveraging of the balance sheet, as well as the gradual improvement in the asset quality performance as legacy exposures are recovered or written off over the next two years.

RATINGS RATIONALE

FIRST DRIVER: SIGNIFICANT CAPITAL BUFFERS BALANCED BY HIGH CONCENTRATION LEVELS AND LEGACY ASSET QUALITY CHALLENGES

ITFC's 'medium' capital adequacy assessment reflects a very high asset coverage ratio with equity at about 107% of development operations in reflection of the corporation's absence of leverage. Looking forward, the corporation aims to expand its leverage ratio up to a debt/equity ratio of 40% over the next three years which continues to support the corporation's very strong capitalization position.

ITFC's strong level of capitalization is balanced by the elevated concentration levels of the bank's top ten exposures with the four largest exposures to below investment grade rated sovereigns —namely to Egypt (B3 stable), Bangladesh (Ba3 stable), Pakistan (B3 stable) and Turkey (Ba1 negative)—accounting for 72% of total trade murabaha finance at the end of 2016 from 77.4% at the end of 2015.

With non-performing financing facilities at 12.9% as of 2016, ITFC's asset quality performs well below the non-performing loan median of 0.3% for A-rated MDBs and in comparison to other institutions that focus on trade finance, a business model that typically benefits from collateralization and government guarantee backstops. That said, the legacy nature of the ITFC's currently non-performing financing facilities, and the prospect of significant recoveries in the future mitigate the ITFC's asset quality challenges.

SECOND DRIVER: HIGH ASSET TURNOVER AND LOW EXPECTED COST OF LOAN FUNDING SUPPORT LIQUIDITY ASSESSMENT

ITFC's liquidity assessment of 'high' is supported by prudent treasury investment practices and adequate liquidity management policies. ITFC's liquidity position benefits from the absence of debt service requirements as of 2016, and takes into account the moderate expected recourse to borrowing resulting in a debt service coverage as a share of liquid assets that Moody's expects to reach up to 180% by the end of 2020, a ratio comparable to other trade finance peers rated by Moody's, and which reflects the comparatively short average maturity of liabilities. As is the case with other trade finance institutions, ITFC's liquidity position remains supported by the low average maturity of the trade finance portfolio, with 73% of exposures liquidating within one year.

Despite ITFC's absence of market issuances and debt management history, Moody's believes that ITFC's membership in the Islamic Development Bank Group (IsDB, Aaa stable) will allow ITFC to access loan funding at similarly favorable terms as the Islamic Corporation for Development of the Private Sector (Aa3 stable).

THIRD DRIVER: ABSENCE OF CALLABLE CAPITAL LIMITS STRENGTH OF MEMBER SUPPORT AT MEDIUM

The absence of formal contractual support in form of callable capital limits the contribution of member support to 'medium' under Moody's methodology. Despite the lack of explicit contractual support, ITFC benefits from strong implicit support from the IsDB as its main shareholder at 36.7% of paid-up capital, followed by Saudi Arabia (A1 stable) holding a further 16.5% directly and a further 11% indirectly. Kuwait (Aa2 stable) also holds a 7% stake in ITFC. In addition, ITFC shares numerous operational, technical and physical assets with IsDB.

As with other associates of the IsDB group, the IsDB's goal is to make ITFC more independent financially, which they achieve by withholding from general capital increases without however fully relinquishing strategic oversight, underpinning Moody's assessment of very high extraordinary support.

ISSUER PROFILE

The International Islamic Trade Finance Corporation is an autonomous entity within the Islamic Development Bank Group created with the purpose of advancing trade to improve the economic condition and livelihood of people across the Islamic world. ITFC has consolidated all the trade finance businesses that used to be handled by various windows within the IsDB group. It commenced operations in Muharram 1429H (January 2008).

ITFC's main source of income is Murabaha trade finance, a shariah-compliant form of trade finance. Its primary focus is to encourage intra-trade among the 57 member countries of the Organisation of Islamic Cooperation (OIC). As a member of the IsDB group, ITFC has privileged access to governments in its member countries and it works as a facilitator to mobilize private and public resources towards achieving its objectives of fostering economic development through trade. The Corporation helps businesses in member countries gain better access to trade finance and provides them with trade-related capacity building tools.

RATING OUTLOOK

RATIONALE FOR THE STABLE OUTLOOK

The outlook for ITFC's rating is stable, reflecting Moody's expectation that the corporation's leveraging of the balance sheet will remain contained and that the formation of new non-performing assets will remain muted and in line with other trade finance institutions in Moody's rated MDB universe, while the main legacy exposures are being recovered or written off.

WHAT COULD CHANGE THE RATING UP

The build-up of debt management history in conjunction with the envisioned strengthening of the liquidity policy would be credit supportive, as would a continued decline in the non-performing asset ratio and a gradual reduction in exposure concentration levels. A successful diversification of the loan portfolio that considerably reduces geographic and single-obligor exposure would also be positive.

WHAT COULD CHANGE THE RATING DOWN

A further deterioration in asset quality or a more significant than anticipated pace of borrowing would be credit negative. An erosion of shareholder support in form of a lower weighted median shareholder rating or in form of weaker than anticipated implicit support would also be credit negative.

The principal methodology used in these ratings was Multilateral Development Banks and Other Supranational Entities published in March 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Elisa Parisi-Capone
Vice President - Senior Analyst
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Yves Lemay
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2017 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors. It would be reckless and inappropriate for retail investors to use MOODY’S credit ratings or publications when making an investment decision. If in doubt you should contact your financial or other professional adviser.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.