Fitch affirms Alaqaria Issuer Default Rating

03/06/2011 00:00 AST

Global credit rating agency Fitch has affirmed Qatar Real Estate Investment Company's (Alaqaria) long term Issuer Default Rating (IDR) and senior unsecured rating at 'BBB ' and its short-term IDR at 'F2'. The outlook on the Long-term IDR is 'stable', its spokesman said, adding the company's $300mn sukuk (due 2012) senior unsecured rating has also been affirmed at 'BBB '.

Stressing that the ratings reflect its strong business model, robust lessor profile and above-average lease duration for the region, Fitch said finance leases provide stable, long-term rental income, which are underpinned by off-take arrangements with Qatar Petroleum (QP) and government-related entities (typically 10-15 year duration), and operational leases agreements of between five and 25 years with QP-related companies.

"These arrangements have provided Alaqaria with sound defensive qualities during the region's property downturn, as has been proven by the stable financial performance of the company to date," the spokesman said. The ratings also reflect Alaqaria's low counterparty risk, as most of its projected income is due to come from strong credits, and the benefits from a guaranteed rate of return on its contracts with QP or QP-related entities.

Under Fitch's methodology, Alaqaria's 'BBB ' rating benefits from a two-notch uplift from its standalone rating of 'BBB-' to reflect the strategic and operational relationship with state-related entities as a leading developer of long-term rental housing projects for both the state and corporates in Qatar.

Fitch cautioned that the ratings may be downgraded if there is a loss of preferential status with the state or with QP, an inability to maintain historical rates of return on new projects, a downturn which leads to significantly lower net interest cover or a substantial increase in leverage.

The ratings may be upgraded if the company's ability to achieve higher returns from new contracts improves or if there is a substantial increase in the absolute level of long-term rental streams, any formal support from the state or a significant improvement in the equity base, it said.

Gulf Times