(MENAFN Press) Capital Intelligence (CI), the international credit rating agency, today announced that it has affirmed the rating of Kuwait Commercial Markets Complex Company's (KCMCC) Sukuk at C. The Negative Outlook on this rating is also retained.
This low rating reflects the Company's very weak financial profile, the net loss for the third consecutive year and the high probability of default at maturity. While the Sukuk under review is governed by a series of covenant ratios covering asset to value, profit distribution and leverage, as well as administrative procedures for the receipt of cash flow from Sukuk assets, the Company has remained in breach and in non-compliance on a number of covenant ratios, together with administrative procedures and requirements. The security package remains the positive factor, largely comprising BOT developments, but also quoted and unquoted shares. The last valuation of the Sukuk assets in July 2011, indicated a still good, asset value to outstanding Sukuk coverage ratio. However, liquidation of these assets - in particular the BOT projects - could be problematic and would certainly require a lengthy process.
Although a token amount was paid, the Company has been unable to meet in full a partial payment due February 2012. Sukuk holders have subsequently agreed to defer the balance to the final maturity in May this year. In view of this latest development, the Company's ability to meet the repayment in less than three months' time remains highly questionable, and is dependent on the Company achieving both large asset disposal and the restructuring of non-Sukuk debts.
The Company's operating cash flow remains limited to modest rental income, with an even more modest amount of dividend income. The Company is therefore ever more highly reliant on asset sales for debt service and without substantial asset sales being achieved within the next 60 days, Sukuk repayment will not be possible. However, management appears confident to meet this obligation from a sale transaction in the pipeline.
CONTACT
Primary Analyst
Agnes Seah
Credit Analyst
E-mail: agnes.seah@ciratings.com
Secondary Analyst and Rating Committee Chairman
Rory Keelan
Senior Credit Analyst
E-mail: rory.keelan@ciratings.com
The information sources used to prepare the credit ratings are the rated entity and public information. Capital Intelligence had access to the accounts and other relevant internal documents for the purpose of the rating, and considers the quality of information available on the issuer to be satisfactory for the purposes of assigning and maintaining credit ratings. Capital Intelligence does not audit or independently verify information received during the rating process.
The rating has been disclosed to the rated entity and released with no amendment following that disclosure. Ratings on the issuer were first released in July 2006. The ratings were last updated in September 2011.
The principal methodology used in determining the ratings is Sukuk Rating Methodology. The methodology and the meaning of each rating category and definition of default, as well as information on the attributes and limitations of CI's ratings, can be found at www.ciratings.com.
