DOHA: Fitch Ratings yesterday affirmed Qatar Real Estate Investment Company QSC's (Alaqaria) Long-term Issuer Default rating (IDR) and senior unsecured rating at 'BBB+', and its Short-term IDR at 'F2'. The IDR and senior unsecured were removed from Rating Watch Positive (RWP). The Outlook is Stable.
The senior unsecured rating of Qatar Alaqaria Sukuk Company (QREIC)'s $ 300m sukuk bonds (due 2012) has also been affirmed at 'BBB+', and removed from RWP.
Fitch resolved the RWP upon receiving clarification regarding final terms and conditions of Barwa Real Estate Company Q.S.C (Barwa) tender offer for the acquisition of the entire share capital of Alaqaria.
The acquisition would have no immediate impact on Alaqaria's credit profile as there would be no major change in business strategy or financial profile. Alaqaria will become a subsidiary of Barwa. However, it will remain a separate legal entity.
Fitch also notes that this transaction will not result in a requirement to prepay Alaqaria/QREIC debt facilities (including the $ 300m outstanding trust certificates) as confirmed by Alaqaria senior management.
Fitch also does not expect Barwa to extract cash from Alaqaria in a way that will have a material impact on Alaqaria credit profile. Alaqaria's Board of Directors will have a new member representing Barwa, while management and operations are expected to remain unchanged. Qatari Diar, the property investment arm of the country's sovereign wealth fund, will keep its 45 percent equity holding in the combined group.
Fitch does not currently factor in any additional credit benefit of the acquisition that could in the future improve Alaqaria's access to support, that may provide Alaqaria with greater financing flexibility, through equity-raising, parent loans, and other forms of support in time of need.
The ratings continue to reflect Alaqaria's strong business model driven by a robust profile, and above-average lease duration for the region. Finance leases provide stable, long-term rental income which are underpinned by off-take arrangements with Qatar Petroleum (QP) and government-related entities (of typically between 10 and 15 years' duration), and operational lease agreements with QP-related companies that are between five and 25 years.
However, despite these benefits, Fitch notes that with most of its contracts relating to QP, Alaqaria faces a high level of customer concentration.
© The Peninsula 2010
