Moody's downgrades GGICO ratings
Dubai, March 16, 2011
Moody's has downgraded the ratings of Dubai-based Gulf General Investment Company (GGICO) to B2 from B1. The ratings were placed on review for possible downgrade.
Moody's said the dowgrade of corporate family rating (CFR) and the probability of default rating (PDR) is prompted by increasing risks associated with its sustained refinancing challenges, including GGICO's inability to issue long-dated debt for the B1; concerns arising due to expectation of negative performance of its investment holdings in line with trends in market and by challenging conditions in Dubai's real estate market.
Moody's is also particularly focused on GGICO's continuing exposure to refinancing risk related to the comoany's perpetual roll-overs.
The rating agency had anticipated that this risk would be partially addressed by the proposed issuance of notes by the end of Q1 2011, which had been postponed in Q4 2010 due to challenging market conditions and is now unlikely to occur.
This decision coincides with the lack of a readily-available contingency funding plan, excluding the perpetual roll-overs on which GGICO has relied upon to date, the ratings agency said.
These actions are indications of a financial policy that constitutes a departure from Moody's assumptions previously factored in the B1 CFR, it added.
The ratings review will focus on GGICO's financial policies and strategies for addressing its refinancing exposure in light of its future liquidity needs and covenant headroom on its largest syndicated facility, which it will need to address in the coming weeks.
Moody's last rating action on GGICO was implemented on November 1, when Moody's assigned a B1 rating to the company's proposed notes offering which was subsequently withdrawn when the offering did not proceed.-TradeArabia News Service