Moody's has placed on review the issuer ratings for Kuwait Projects Company Holding (Kipco), a major investment holding company, for possible downgrade.

The ratings agency has also downgraded the Kuwait Projects Company (Cayman) as well as the instruments rating under the USD EMTN programme and Kipco's short-term issuer rating of P-3.

Moody's decision to place the ratings on review follows a more detailed assessment of Kipco's year-end 2010 financial data. The trend line of some key metrics - cash coverage and market-value leverage (MVL) - indicates a weakening against prior years.

Whilst MVL at 22 per cent (19 per cent at FYE 2009) remained within Moody's expectations for the Baa2 rating category, i.e. below 25 per cent, cash coverage weakened from the 2009 year-end level of 3.7 times to a maximum of 2.6 times depending on the inclusion of certain cash flows which are less likely to be sustainably supportive of cash generation.
Moody's also noted that net debt of $866 million was higher than was previously expected.

The review will focus on the cash generation capacity of Kipco's investment holdings, an assessment of the liquidity strength and refinancing requirements in addition to an evaluation of its core subsidiaries, namely those of United Gulf Bank (UGB), Burgan Bank and OSN showtime (not rated).

UGB's Ba1 long-term and the D- bank financial strength rating (BFSR) as well as BB's ratings (long-term issuer rating of A2 and D+ BFSR) have a negative outlook.

The last rating action on Kipco was on June 10, 2010, when Moody's downgraded the ratings to Baa2 from Baa1 and the short-term rating to P-3 from P-2.-TradeArabia News Service