Fitch places Alaqaria's IDR rating as BBB+

In the same announcement, Alaqaria noted, Fitch reaffirmed the short term IDR of 'F2'.

This will affect Alaqaria 's corporate rating as well as the rating for its $300m of outstanding sukuk due in 2012 and will result in the ratings agency upgrading or maintaining its current ratings, said the company in a news release yesterday.

Fitch will review and announce its decision upon completion of the proposed merger, according to the announcement.

This announcement follows an early statement by Moody's Investors Services in which it said that it had downgraded the ratings for Alaqaria and its $300m sukuk due in 2012, to Baa1 from A2. The ratings have been kept on review for further possible downgrade once the merger with Barwa Real Estate Company (Barwa) closes.

These follow the recent statement that the Boards of Directors of Barwa and Alaqaria have agreed the financial terms of the proposed merger of the two companies.

The companies announced that Barwa will offer Alaqaria shareholders 1.100 Barwa shares for each Alaqaria share. The offer represents a 30.6 percent premium on Alaqaria shares the last trading day prior to the announcement and will create a leading regional real estate company with a combined market capitalisation of over QR11.1bn ($3bn).

The Qatari Government and Qatari Diar Real Estate Company ( Qatari Diar ) confirmed their support for the transaction. Subject to detailed offer terms, Qatari Diar approved the merger and accepted the offer in respect of its holdings of 45 percent and 27 percent of the share capital of Barwa and Alaqaria respectively and agreed to maintain a 45 percent equity shareholding in the enlarged Barwa group.

Further details of the transaction, which remains subject to further approvals from the companies' Boards of Directors, equity shareholders and regulators, will be announced in due course. Commenting on the announcement by Fitch, Sheikh Khalid bin Khalifa bin Jassim Al Thani Chairman and Managing Director of Alaqaria , said: "Today's news from Fitch underlines the logic of the Qatari government's vision in creating a Qatari real estate champion through the implementation of this merger.

"The government's unequivocal support for this transaction has been expressed through Qatari Diar 's decision to maintain its shareholding within the enlarged group - thereby increasing their holding in Alaqaria from 27 percent to 45 percent, underlining their very real support for us and our strategy."

Alaqaria 's Chief Executive Officer, Mohammed Ismail Mandani said that Alaqaria already enjoys a strong credit rating due to its position as one of the country's leading developers. It has a long history of delivering steady growth and stable cash flow generation, he said.

"This results from the company's solid business model and the consistent successful delivery of its strategy over time. We are pleased that Fitch has recognised the potential benefits of this merger," he added.

"However, conversely, we do not understand the rationale behind Moody's downgrade that is based on their belief that Government support for Alaqaria will be reduced following the merger.

"In fact, not only have the Government and Qatari Diar been explicit about their support for the transaction, but the Government's shareholding in Alaqaria through Qatari Diar will actually increase significantly following the completion of the transaction."