The business and financial risk profiles of Kuwait-based Gulf Investment CorporationGulf Investment Corporation are no longer in line with an investment-grade rating.

We consider GICGIC as a GRE under our methodology and assess its stand-alone credit profile at one notch below the long-term counterparty credit rating.

We are lowering our counterparty credit ratings on GICGIC to 'BBB-/A-3' from 'BBB/A-2'.

The stable outlook reflects our opinion that active deleveraging of the balance sheet has started to stabilize GICGIC's financial profile, albeit to weaker levels than previously.

PARIS (Standard & Poor's) Nov. 19, 2009--Standard & Poor's Ratings Services today said it downgraded its long- and short-term counterparty credit ratings on Kuwait-based wholesale institution Gulf Investment Corporation G.S.C. (GIC)Gulf Investment Corporation G.S.C. (GIC) to 'BBB-/A-3' from 'BBB/A-2'. The outlook is stable.

At the same time, we removed the ratings from CreditWatch with negative implications, where they had been placed on Feb. 9, 2009.

"The downgrade reflects our opinion that GICGIC's business and financial profiles of are no longer consistent with a stand-alone credit profile assessed in the investment-grade category," said Standard & Poor's credit analyst Paul-Henri Pruvost.

We acknowledge, however, that active deleveraging should contribute to a gradual stabilization of GICGIC's financial profile over the long term.

The ratings on GICGIC are constrained by high loan-to-value (LTV) ratios, strong reliance on short-term funding, rather high risks in its project investments and securities portfolios, and the somewhat illiquid nature of the majority of its project investments. Mitigating these factors are GICGIC's status as a government-related entity (GRE) under our criteria, strong ongoing funding support from shareholders, and adequate capitalization in our view.

We assess GICGIC's SACP at 'BB+', including ongoing funding support from shareholder states.

In accordance with our criteria for GREs, we think that there is a "moderate" likelihood that state shareholders would provide support to GICGIC in the event of financial distress. This is based on our assessment of GICGIC's "strong" link with its state shareholders, given their equal and full ownership; and "limited" role in the Gulf Cooperation Council regional economy.

"The stable outlook reflects our opinion that GICGIC's financial profile is set to remain in line with the ratings, and that it should not deteriorate from current levels," said Mr. Pruvost.

We expect GICGIC to address near-term funding maturities in a timely manner. We also expect GICGIC to maintain its LTV ratios around current levels; the ratings would come under pressure if it is unable to do so. Any weakening of the link between GICGIC and its shareholders would also be a negative rating factor. In addition, if credit risk in GICGIC's portfolio were to increase again, possibly resulting from rebalancing assets from low-risk fixed income investments to higher-risk project investments, we believe that GICGIC would need to strengthen its financial profile versus our current expectations to remain consistent with the ratings. We do not expect to raise GICGIC's SACP in the medium term.

- Ends -

© Press Release 2009

 

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