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Thu 11 Nov 2010 03:26 PM

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Moody’s lowers Saudi Arabia's Dar Al Arkan rating to Ba3

Lower land sales, higher proportion of debt, dividend payment decision this year prompted the cut

Moody’s lowers Saudi Arabia's Dar Al Arkan rating to Ba3
RATINGS DOWNGRADE: Moody’s cut its credit ratings for Dar Al Arkan to Ba3, the third-highest non-investment grade (Getty Images)

Moody’s
Investors Service cut its credit ratings for Dar Al Arkan Real Estate
Development Co, Saudi Arabia’s biggest developer by market value, one level to
Ba3, the third-highest non-investment grade.

Lower
land sales that hurt earnings, a higher proportion of debt and a decision to
pay a dividend this year prompted the cut, Martin Kohlhase, a Dubai-based
analyst at Moody’s wrote in a report dated November 10.

Dar
Al Arkan said October 20 third-quarter profit fell 53 percent to SR289.6m ($77m). The shares have declined 38 percent this year, compared
with a 5.3 percent gain for Saudi Arabia’s benchmark stock index. The company
has about $1.65bn of debt outstanding, according to data compiled by
Bloomberg.

The
price on the company’s $1bn Islamic bond maturing in July 2012 has
dropped 2.5 cents this quarter to 82.80 cents on the dollar, according to
prices compiled by Bloomberg.

"Moody’s
is monitoring how liquidity and operating cash flows continue evolving in light
of the sukuk maturity in 2012," the report said. The company’s short-term
liquidity profile for the 12 months from the end of September is
"adequate, based primarily on expected funds from operations stemming from
land sales and collections from sales of residential units," Moody’s said.

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