Dubai, Asharq Al-Awsat- The Gulf Cooperation Council (GCC) is among one of the most attractive developing markets for investors and holding companies within the region are likely to form the next wave of capital market pioneers, according to a report published recently by Standard & Poor’s Ratings Services, titled ‘Rating GCC Holding Companies: Striking A Balance Between Operations And Investments.’
The ratings gap between GCC and European holding companies is also narrowing as the level of sophistication, stability and transparency in the region improves.
Access to the international capital markets will be critical for funding these entities’ ambitious growth intentions and diversifying their investor base. Hence, we expect a significant increase in the use and acceptance of credit ratings, helping holding companies place their debt with domestic and international investors and further improving transparency.
The analysis of holding companies in the countries of the Gulf Cooperation Council (GCC) requires an approach that takes into account the unique company characteristics and regional issues
“All corporate hybrids are born unequal, and each offers unique characteristics. Those within the GCC, however, are also subject to a combination of corporate governance issues and strong underlying implicit or explicit support from owners or governments,” said Standard & Poor’s credit analyst Mohammed Fayek. “Some entities require a ratings approach that is heavily focused on financial flexibility, while others require one that looks at both financial flexibility and operating performance.”
With billions of dollars invested in local development and equally large funds moving beyond local boundaries into the international arena, GCC holding companies are evolving into more complex entities. Standard & Poor’s analysis of companies must also evolve, therefore, to accommodate the unique company characteristics and regional issues.
‘GCC holding companies with diversified portfolios of listed high-quality, preferably investment-grade rated investments have a better chance of attaining a higher rating. A larger exposure towards operating entities and wholly-owned or controlled investments tends to restrict the ratings, as these are generally less liquid and expose holding companies to operating risks.’
Standard & Poor’s has received significant interest in ratings from issuers across many industries in the region in recent years, accentuating the remarkable growth in the region. Although financial institutions are the most commonly rated entities in the GCC, diverse holding companies are becoming increasingly interested in ratings. Although Standard & Poor’s only publicly rate a limited number of entities–such as Dubai Holding Commercial Operations Group LLC (DHCOG; A+/Stable/–) in the United Arab Emirates, Saad Group (BBB+/Stable/A-2) in Saudi Arabia, and Kuwait Projects Co. (Holding) K.S.C. (KIPCO; BBB-/Positive/A-3) in Kuwait–several others have gone through the ratings process confidentially to benchmark themselves internationally and in order to prepare for capital market entry when the time is right.
The outlook for corporate holding companies and the growth of the region’s capital markets will be discussed in greater detail at Standard & Poor’s inaugural conference, ‘Supporting The Development Of Middle East Financial Markets,” in Dubai on April 24, 2007. The complementary, full-day event will feature presentations on a range of activities and issues critical to the future of markets, investors and issuers in the region. Please contact the media contact listed below to register your attendance.