Abu Dhabi – Mubasher: Moody's Investors Service on Wednesday upgraded its issuer rating of Abu Dhabi-based Aldar Properties to Baa2 from Baa3 PJSC.
Moreover, the ratings agency announced upgrading the UAE company’s rating of the $750 million senior unsecured Trust Certificates due in 2018 and issued by Sukuk Funding (No. 3) Limited to Baa2 from Baa3, according to a statement.
The outlook on all ratings is stable, Moody’s reported.
"Our decision to upgrade Aldar's ratings reflects its deleveraged balance sheet, improved earnings quality and our view that it will be able to withstand ongoing weakness in the Abu Dhabi real estate market," said Rehan Akbar, a Moody's analyst and assistant vice president.
This upgrade reflects Aldar's “healthy credit metrics, which Moody's believes will remain relatively resilient in the current weak operating environment in Abu Dhabi,” the statement showed.
“Moody's base case forecast suggests that Aldar's credit metrics will remain strong over the coming 12-18 months with gross leverage staying below 3.0x and EBITDA interest coverage staying well above 8.0x,” the ratings agency highlighted.
Aldar's management has taken – over the past few quarters taken - several positive steps, providing Moody’s with clarity on how the company, which is one of Abu Dhabi's leading real estate companies, will be financially and strategically managed going forward.
“This includes executing on its AED 3 billion investment plan to grow its recurring income portfolio, formalising a relatively clear dividend policy and prudently extending its debt maturity profile,” according to the statement.
After taking into account the refinancing of its bilateral loans in the fourth quarter of 2016, Aldar’s single debt maturing over the next two years is the $750 million sukuk due in December 2018.
Abu Dhabi’s property market “has yet to reach its bottom and could face additional softening in 2017 as a result of reduced government spending and rightsizing in the corporate sector,” Moody’s added.
Aldar will be exposed to the current economic slowdown in the UAE’s capital, with the hospitality sector particularly being “sensitive” to the decline in economic activity and consumer demand for both purchasing and rentals of residential units remaining soft.
“With business operations primarily in Abu Dhabi, Aldar's rating is constrained in the Baa category as a result of high geographic concentration and meaningful exposure to the higher risk real estate development business,” the report concluded.
