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Standard & Poor’s adjusts Aldar rating to ‘B’

DUBAI - Standard & Poor’s Ratings Services said on Monday that it lowered its long-term corporate credit rating on Abu Dhabi’s Aldar Properties PJSC to ‘B’ from ‘BB-’. Standard Poor’s also said that it placed the ‘B’ long-term and ‘B’ short-term ratings on CreditWatch with negative implications.

“The downgrade reflects our view of the very challenging real estate market conditions in Abu Dhabi and the reliance of Aldar’s future earnings and cash flow on continued demand for both the sale and rental of property and land,” said Standard Poor’s credit analyst Tommy Trask.

New sales of residential units and land are extremely slow, and delays in handover hurt the company’s earnings and cash flow in the first nine months of 2010.

The company is also experiencing problems collecting land receivables, 30 per cent-40 per cent of which are overdue. Based on the pipeline of new supply, both in Abu Dhabi and Dubai, we do not anticipate an improvement in market conditions anytime soon. As of September 30, 2010, Aldar’s total debt (as adjusted by Standard Poor’s) was Dh30.4 billion.

“The ‘B’ rating on Aldar is based on our view of the company’s stand-alone credit profile (SACP) of ‘ccc+’, which incorporates an element of ongoing government support, plus two notches of uplift reflecting our opinion that there is a moderately high likelihood that the Abu Dhabi government would provide timely and what we view to be sufficient extraordinary support to Aldar in the event of financial distress,” it said.

“Our assessment of Aldar’s stand-alone credit profile reflects weak property market fundamentals, particularly relating to residential and land sales, which are a key driver of cash-flow generation, large funding needs, high debt levels, and limited operating history.”

“In our opinion, Aldar’s credit strengths include its market position, large land bank, close relationship with the government in project planning and management, and growing investment property portfolio.”

business@khaleejtimes.com