CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the rating of The Goldman Sachs Group Inc.'s (GS) JANY Sukuk Company Limited (JANY) guaranteed trust certificate issuance programme at 'A'. The certificate programme's rating is equalized with GS's Issuer Default Rating (IDR) of 'A', which was last reviewed on May 19, 2015.
KEY RATING DRIVERS
The equalization of the certificate programme's rating to those of GS is due to the Sukuk's structure, which contains the following elements:
--Upon a trust dissolution event, J. Aron & Company (J. Aron) will be obliged under the Murabaha Agreement to acquire or arrange for a third party purchaser to acquire, JANY's beneficial interest in the commodities comprising the Wakala portfolio.
--The deferred payment price payable to the issuer under the Murabaha contract will be sufficient to fund payment of the face amount and any periodic distribution amounts due on the certificates upon (and any additional periodic distribution amounts accruing for a period of up to 14 days following) the occurrence of a trust dissolution event or the scheduled dissolution date of the trust.
--GS will unconditionally and irrevocably guarantee the payment obligations of J. Aron under the Murabaha contract, including an obligation to pay the face amount and any periodic distribution amounts due on the certificates upon (and any additional periodic distribution amounts accruing for a period of up to 14 days following) at the occurrence of a trust dissolution event or the scheduled dissolution date of the trust.
Additionally, the guarantee noted above will rank pari passu with all other unsecured and unsubordinated indebtedness of GS, which supports the equalization of ratings.
Fitch has given no consideration to any underlying assets or any collateral provided, as Fitch understands that the issuer's ability to satisfy payments due on the certificates will ultimately depend upon J. Aron and GS satisfying their unsecured payment obligations to the issuer under the transaction documents described in the prospectus.
By affirming such ratings to the programme and certificates to be issued under it, Fitch does not express an opinion on the programme structure's compliance with Shari'a principles or whether the relevant transaction documents are enforceable under applicable law.
The Sukuk program does not benefit from a cross-default provision within the guarantee documents, while certain other Fitch-rated GS debt issuances benefit from these provisions. In the event of GS's bankruptcy or insolvency, Fitch believes this could result in time-related subordination of the Sukuk notes relative to other creditors of GS whose claims would be accelerated in the event of default. However, the outcome for the Sukuk notes would be uncertain, and would depend on the remaining maturity of the notes, the performance of the reference collateral and the actions of the regulatory authorities in a bankruptcy scenario.
GSs ratings continue to be supported by its investment banking franchise, solid liquidity position, better-than-average capital position, and strong risk management. The ratings are constrained by GS's focus on capital market activities and relatively higher wholesale funding.
Senior Unsecured Debt
The rating of the programme will be influenced by changes in GS's long-term IDR. A downgrade of GS's IDR would result in a downgrade to JANY's long-term debt rating. Depending on the magnitude of a downgrade of GS, this could potentially result in notching between the Sukuk programme and GS's IDR to reflect potential time-related subordination associated with the lack of a cross-default provision.
GS's rating upside is viewed as limited given the firm's current business and funding profiles. A material diversification of the firm's revenue sources which results in increased performance stability combined with further improvement and diversification in GS's funding profile could potentially result in moderate upward rating momentum.
Downward rating pressure for GS could be triggered by a material loss, significant increase in leverage and/or deterioration in liquidity levels. Similarly, any unforeseen or outsized fines, settlements or charges could also have adverse ratings implications.
The rating actions are as follows:
JANY Sukuk Company Limited
--Long-term debt rating affirmed at 'A'.
Additional information is available on www.fitchratings.com
Global Bank Rating Criteria (pub. 20 Mar 2015)
Rating Sukuk (pub. 18 Aug 2015)
Dodd-Frank Rating Information Disclosure Form