Capital Intelligence reaffirms the rating of NIG Sukuk Company

Capital Intelligence (CI), the international credit rating agency, announced that it has reaffirmed the rating of NIG Sukuk Company's $475m Mudaraba Sukuk at 'BBB-'. The Outlook for the rating is 'Stable'.

Despite the deterioration of the financial standing of the Obligor and Mudarib, National Industries Group Holdings S.A.K., Kuwait (NIG), and its continued weak performance over the past two years, the Sukuk rating is affirmed based largely on the Company's demonstrated ability to meet this Sukuk obligation.

While NIG has sufficient liquidity in terms of cash balances and quoted financial investment holdings, however, the Company have instead chosen the refinancing route. This decision reflects the Company's focus on conserving liquidity and on debt management given the difficult operating environment.

The Outlook of the rating is 'Stable', as management has successfully raised the required funds and the Sukuk will be repaid in full at maturity.

While remaining one of the biggest and most diversified companies in Kuwait, NIG has been performing poorly with net losses reported for the past two years.

The Company's main assets remain its core operating companies and a large financial investment portfolio, which includes stakes in a number of blue chip companies. However, with the continued difficult operating environment and weak stock market, contributions from the core operating companies have been limited and impairment losses have continued to be taken against its financial investments holdings.

The Company's earnings have also been pressured by the high financing costs of its large debt, even though the latter has been declining (albeit modestly) over the past two years. However, leverage has not tracked this positive trend due largely to the loss-driven contraction of the equity base. The Company's continued ability to roll over/refinance maturing short-term debt, as well as the extension of some of these to longer term loans on an unsecured basis, remains the major positive factor.

NIG's liquidity has tightened over the years but remained satisfactory at end Q1 2012. Going forward, the Company's performance is likely to remain constrained by the challenging operating environment and, like most companies in Kuwait, a significant turnaround is very much dependent on the speed of the government in executing the KWD100 billion approved economic plan.

NIG was established in 1961 by the Government of Kuwait. The Company's core shareholder base, which included the Public Institute of Social Securities and prominent Kuwaiti families and institutions, remained stable at end Q1 2012.

NIG is one of the largest investment holding companies listed on the Kuwait Stock Exchange. On a consolidated basis, NIG has assets totalling KWD1.5bn and an equity base of KWD518.7mn at end H1 2012.