Dar gets ratings downgrade

DAR DOWNGRADE: Kuwait-based investment firm sees foreign curency debt rating cut to default status. (Getty Images)

Capital Intelligence, the international credit rating agency, announced on Monday it has downgraded The Investment Dar's foreign currency long and short-term ratings to 'D' (Default) from 'SD' (Selective Default).

The latest rating action follows Dar's recent default on a $100 million sukuk, which matures in 2010.

The agency downgraded Dar to 'SD' in February from 'BB' with a negative outlook, following the default on one of its obligations.

Dar has meanwhile stated that the recent default on the sukuk was made in order to bring sukuk investors to the same level as other creditors and debt holders; and as part of the overall debt restructuring of the firm.

Dar, one of the most high profile investment firms in Kuwait, has faced difficult times over the last nine months as the global financial crisis and the resulting tightening in credit funding markets has placed huge liquidity pressure on the firm.

Specifically, it was overly-reliant on short-term funding which subsequently dried up. In addition, the firm's financial flexibility diminished significantly, due to the deteriorating equity, investment and real estate markets both domestically and internationally.

Meanwhile, investors in the 100 million sukuk will form part of the approximately $3.45 billion debt restructuring plan it is currently negotiating with creditors and investors.

If the restructuring can be agreed, part of the plan will include disposal of certain assets within its portfolio - assets include Bahrain Islamic Bank, Boubyan Bank and Aston Martin of the UK.

Assuming Dar can successfully restructure its debt, Capital Intelligence says its business model will likely change dramatically going forward.

Instead of managing a portfolio containing a considerable number of small investments (it currently has around 150 holdings with some valued as low as KD3 million), Dar intends to trim the number of its holdings which will make it much easier to manage and monitor.

Many challenges remain for Dar in agreeing and completing the debt restructuring. Credit and capital markets throughout the region remain tight and appetite for risk continues to be low, says the agency.

It added that it will continue to monitor progress in Dar’s negotiations with creditors and debt holders.

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