Aldar’s ratings on review: Moodys

Moody's Investors Service on Tuesday changed the direction of the ongoing review of the ratings of Aldar Properties to direction uncertain, having previously had the ratings on review for possible downgrade, said a press statement.

The affected ratings are Aldar's Ba3 Corporate Family Rating (CFR), the B1 debt instrument ratings for Aldar's $1.25 billion bond (due 2014 and issued by Atlantic Finance Limited) as well as for its Dh3.75 billion sukuk (due 2013 and issued by Sukuk Funding (No. 2) Limited).

Today's rating action follows Aldar's announcement on 13 January 2011 that it -- together with the government of Abu Dhabi
(rated Aa2/stable outlook) -- would take a number of far-reaching measures to steer the company towards a "stable and sustainable platform". Abu Dhabi's decisive actions are clearly supportive for Aldar's ratings over the near term, although Moody's will be assessing the longer-term implications of the announced asset impairments and sales to the government on its medium-term business and cash flow prospects.

Aldar's actions will result in an impairment charge of Dh10.5 billion (approximately $2.9 billion); (ii the reimbursement and sales for the transfer of certain assets to the government of Abu Dhabi totaling Dh10.9 billion; (iii) the sale of residential units and land to the government of Abu Dhabi for Dh5.5 billion; and (iv) the placement of a convertible bond worth Dh2.8 billion, pending the approval of an extraordinary general meeting.

In conjunction with the announcement, the Abu Dhabi Department of Finance also published a press release addressing the decision to provide support to Aldar. The government noted that Aldar is a private company that pursues the construction of projects that are important for the development of Abu Dhabi's economy. The statement also reinforces the central role Aldar plays in shaping the Emirate's growth and economic development although government support for Aldar -- which Moody's views as moderate -- is clearly distinguished from other Abu-Dhabi-based Government Related Issuers where Moody's ratings incorporate high (Taqa) and very high (IPIC, Mubadala, TDIC) support respectively.

During the continued review, Moody's will assess the pro-forma capital structure of Aldar and the cash flow generating ability of the remaining assets in relation to its debt maturity profile and against further capital spending requirements. The rating agency will also seek a dialogue with Abu Dhabi government representatives to validate current support assumptions. Moody's notes that it will also assess the evolving debt structure in the context of the priority ranking of different debt classes that could lead to a re-alignment of rated debt instruments (currently rated B1) and the CFR (currently rated Ba3) should the secured debt portion in Aldar's future debt structure become less material in relation to unsecured creditors.

Moody's last rating action for Aldar was implemented on 9 August 2010, when the rating agency downgraded the issuer rating by two notches to Ba3 from Ba1. At the same time, Moody's converted Aldar's issuer rating into a CFR and assigning a Probability of Default Rating (PDR) of Ba3, in line with the rating agency's practice for corporate issuers with non-investment-grade ratings.
Moreover, Moody's at the time also downgraded to B1 from Ba1 the rated debt instruments issued by Atlantic Finance Limited and Sukuk Funding (No. 2) Limited and maintained all ratings on review for possible downgrade.

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