RAM Ratings has downgraded the rating of Bahrain Mumtalakat Holding Company BSC's (Mumtalakat or the Company) RM3 billion Sukuk Murabahah Programme (2012/2032) to AA3/Stable from AA2/Negative in conjunction with the downgrade of Bahrain's rating to AA3(pi)/Stable from AA2(pi)/Negative. This follows the concurrent revision of the outlook on the ratings of both entities to negative on 8 April 2015. The rating downgrade on Bahrain is mainly premised on the country's steeper-than-anticipated fiscal deterioration, which was precipitated by low oil prices that significantly trim government revenue. Bahrain in our view also has little flexibility in reducing subsidies and social welfare spending at this point in time, which strains its much-needed efforts on fiscal consolidation.
RAM sees Mumtalakat as an extension of the Bahraini government, based on the Company's critical linkage to the government, its strategic role in the economy and the government's solid support for the Company. Accordingly, Mumtalakat's issue rating is equated with Bahrain's rating.
As a holding company, Mumtalakat's income is almost entirely made up of dividends from its key investee companies in various industries, largely concentrated in Bahrain. Mumtalakat recorded a higher group-level pre-tax profit of BHD91.63 million in FY Dec 2014 (FY Dec 2013: BHD82.66 million), driven by Aluminium Bahrain's stronger performance and the continued reduction of Gulf Air's operational losses with ongoing financial assistance from the government.
Mumtalakat's balance sheet is deemed conservative, given that its company- and group-level average gearing ratios have been kept below 0.4 times over the last 5 years. The Company also derives adequate liquidity and financial flexibility from its company-level cash balances, liquid treasury portfolio, and good access to various financing means domestically and abroad.
Media contact
Cheong Kah Weng
(603) 7628 1113
kahweng@ram.com.my
© Press Release 2015
