Moody’s cut the company’s issuer rating to Baa3 from Baa2 with negative outlook, and the debt instrument ratings on bonds, due in 2016 and 2020, issued by KIPCO under a $1 billion Euro medium-term notes (EMTN) program.
“The downgrade to Baa3 from Baa2 reflects a weaker cash coverage ratio that has deteriorated on the back of lower dividend income and higher interest costs,” Moody’s said in a statement.
Moody’s said the negative outlook showed the downside risk for the ratings over the coming 12 to 18 months if KIPCO was unable to continue strengthening its financial profile.
Kuwait’s Burgan Bank is KIPCO’s commercial banking arm and the firm also has stakes in United Gulf Bank, as well as other financial services sector companies across the Middle East and North Africa.
KIPCO repaid a $350 million bond in April at maturity and its chief financial officer said at the time the company planned to pay all 2011 maturities on time or ahead of schedule.
Moody’s said it was concerned underlying operating and financial performance trends of KIPCO’s key investments such as Burgan Bank may not be sufficient to lead to a significant increase in dividend payments, thereby bolstering its dividend income and cash coverage ratio.
KIPCO’s quarterly net profit surged 300 percent, the company said in May, from two million dinars in the prior-year period.
The company’s last bond issue under its EMTN program was a 10-year $500 million bond in July last year at 9.5 percent.
