Moody's downgrades NIG
London, August 9, 2011
Moody's Investors Service has downgraded to B3 with a stable outlook from B2 with a negative outlook the Corporate Family Rating (CFR) and Probability of Default Rating (PDR) of National Industries Group Holding (NIG), as well as the instrument rating for the $475 million sukuk issued by NIG Sukuk.
NIG has taken in recent months a number of steps to reduce its exposure to refinancing risk by renegotiating on a longer-term basis some short-term credit facilities in conjunction with formulating and beginning to pursue various strategies in anticipation of redeeming and refinancing the August 2012 sukuk maturity which Moody's regards as being supportive for NIG's overall credit profile.
In that context, the downgrade of NIG's ratings to B3 with a stable outlook reflects a combination of factors that include the execution risk associated with the steps still to be taken in anticipation of the sukuk maturity in 12 months time to ensure a strengthening of its overall risk profile and a reduction of the group's default risk combined with the fact that, the agency said.
It may take some time for NIG to strengthen its current financial profile where Moody's anticipates that some of its key credit metrics will remain more in with a single B credit profile over the next 18-24 months, it said.
In that respect, Moody's notes in particular NIG's highly levered capital structure as expressed by a market value leverage ratio of above 51 per cent as of end of June 2011 and a cash coverage ratio (defined as cash dividend and interest income to cash interest expense) expected to remain below 1.0x in the coming two years.
While some core industrial and commercial holdings have improved their financial performances in 2010, the overall ability of these core holdings to upstream significant dividends to support NIG's financial profile is not expected to improve significantly in the near term, although Moody's recognises that NIG could rely on its most liquid holdings to address any shortfall.
The decision to assign a stable outlook reflects the fact that the strategies being considered in preparation for the 2012 sukuk maturity appear achievable, though with some execution risk where that execution risk is now adequately captured at the current rating level. - TradeArabia News Service