Dar Al-Arkan sees no ratings downgrade
Riyadh, August 24, 2010
Saudi-based Dar Al-Arkan Real Estate Development Company said on Tuesday it does not expect any of the three main ratings agencies to downgrade it after Moody's put it under review earlier this month.
Moody's placed on review for potential downgrade the Ba2 ratings for Dar al-Arkan, Dar Al-Arkan International Sukuk Company II and its $450 million sukuk.
"I don't see any fundamental reasons that should lead to a downgrade by any rating agency," managing director Saud al-Gusaiyer said in an interview.
"Our debts account for 33 per cent of our assets and as a real estate company we can go up to 80 and even 100 per cent. Our debt to equity ratio is 53 per cent," he told Reuters.
Declining to comment on Moody's review, Gusaiyer said the firm will not "have any problem" paying back a total of 7.8 billion riyals ($2 billion) in debt, of which 1 billion riyals will fall due in 2011 and the remainder before end-2016.
"Our assets stood at SR23 billion by end-June and we have SR1.3 billion in cash."
Asked about the potential impact an eventual implementation of the mortgage law may have on the firm's land bank assets, he said: "Property prices at the worse case scenario will stabilise. The implementation of the mortgage law should on paper reduce the prices of property but it will take years, at least a decade before it starts doing so".
The long-anticipated mortgage law would be approved this year but its implementation may require more time, he added.
"I would be very surprised if it does not get approved this year. It is five laws in total. But I don't know about the implementation, it will require some time. The fortunate thing is that the central bank will handle its implementation and I think it will work on it fast," Gusaiyer said.
Saudi Arabia suffers from a chronic shortage of housing and constant rises in land prices with less than a third of the population owning a home.-Reuters