Fitch Assigns Saudi Arabia’s New Sovereign Sukuk Programme ‘A+’ Rating
Fitch Ratings has assigned Saudi Arabia’s trust certificates issuance programme, issued through KSA Ijarah Sukuk Limited, a rating of ‘A+’. In a rating note, Fitch stated that the rating is in line with Saudi Arabia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘A+’/Stable.
KSA Ijarah Sukuk Limited is incorporated in the Cayman Islands as a limited liability company for the purpose of participating in the transactions contemplated by the transaction documents.
It is wholly owned by Saudi Arabia and is the issuer, trustee, purchaser, and lessor. Saudi Arabia, acting through the Ministry of Finance, is the obligor, seller, lessee, and the service agent. HSBC Corporate Trustee Company (UK) Limited is acting as the delegate of the trustee.
The sukuk programme’s rating is driven solely by Saudi Arabia’s Long-Term Foreign-Currency IDR, which we affirmed at ‘A+ with a Stable Outlook on 25 July 2025.
“This reflects our view that a default of the senior unsecured obligations would reflect a default of Saudi Arabia, in accordance with our rating definitions.
“We have not considered any underlying assets or collateral provided when assigning the rating, as we believe the issuer’s ability to satisfy payments due on the proposed sukuk will ultimately depend on Saudi Arabia satisfying its unsecured payment obligations to the trustee, as described in the prospectus and other transaction documents”.
Fitch said Saudi Arabia would be required to ensure full and timely repayment of its obligations due to its various roles and obligations under the sukuk structure and documentation, especially – but not limited to – the following features:
On each periodic distribution date, an amount equal to the rental payable will be paid by Saudia Arabia, which is intended to fund an amount equal to the periodic distribution amounts payable by the trustee under the trust certificates.
On the scheduled dissolution date, the trustee will have the right under the purchase undertaking to require Saudi Arabia to purchase and accept the transfer and conveyance of all of the trustee’s rights, title, interest, benefits and entitlements, present and future, in, to and under, the remaining usufruct rights in or relating to the lease assets at an exercise price, and these amounts are intended to fund the relevant dissolution amount payable by the trustee.
The exercise price includes the face amount of the trust certificates then outstanding on the dissolution date plus an amount equal to all accrued and unpaid periodic distribution amounts. The dissolution amount means the principal amount or other amount as specified in the final terms.
Saudi Arabia covenants and undertakes that it will use the lease assets solely for shari’a-compliant activities. If it fails to comply, it would constitute a dissolution event.
“If Saudia failed to pay the exercise price when due and payable and the trustee is unable to make a claim under the indemnity for an amount equal to the exercise price as a result of it not being, or otherwise claiming that it is not in possession, custody or control of all or any part of the any of the lease assets,
“…then Saudi Arabia will irrevocably and unconditionally grant the trustee the right to arrange, at the cost of the trustee, as soon as is practicable, for the remaining usufruct rights to the assets to be registered in the Real Estate Registry in the trustee’s name, or that of its nominee, agent, delegate or assignee.
“This is conditional on no total loss event having occurred or continuing; it is possible under all applicable laws and regulations to give effect to the registration of the remaining usufruct rights to the relevant assets; and the lease assets are registered in the Real Estate Register.
Fitch said it does not believe this clause is sufficient for it to treat the debt as secured or higher ranking than existing indebtedness, due to uncertainties and complexities related to legal framework and regulations, the obligor’s willingness and ability to register, and the lack of precedents.
“Our assessment of the effect of future usufruct-registration clauses will be on a case-by-case basis, and we are monitoring this evolving area. “Fitch could reassess the above assumptions regarding Saudi Arabia’s ratings and debt ranking, if warranted by developments”.
The payment obligations of Saudi Arabia (in any capacity) under the transaction documents will be its direct, unconditional, and unsecured obligations and rank pari passu, without preference among themselves, with all other its unsecured external indebtedness, from time to time outstanding.
The sukuk programme includes a negative pledge, cross-acceleration clause and indemnity. Saudi Arabia expressly declares and undertakes that if a total loss event has occurred, and the relevant lease assets have not been replaced by the 59th day after the total loss event date, the obligor will pay an amount equal to the unused usufruct amount directly into the transaction account, no later than the 61st day after the total loss event date.
Fitch said certain aspects of the transaction are governed by English law, while others are governed by the laws of Saudi Arabia. “We do not express an opinion on whether the relevant transaction documents are enforceable under any applicable law. “However, the rating on the sukuk reflects our belief that the government will stand behind its obligations.
“We do not express an opinion on the trust certificates’ compliance with sharia principles when assigning ratings to the trust certificates”. The rating on the sukuk is sensitive to any changes in Saudi Arabia’s Long-Term Foreign-Currency IDR, according to Fitch.
