GIC sukuk given AAA rating

Malaysia's RAM Ratings has assigned a preliminary AAA rating to Gulf Investment Corporation GSC's (GIC or the Corporation) 3.5 billion ringgit Sukuk Wakalah bi Istithmar Programme.

Concurrently, RAM Ratings has reaffirmed GIC's respective AAA and P1 long- and short-term financial institution ratings while also reaffirming the AAA long-term ratings of the Corporation's 600 million ringgit Senior Unsecured Bonds (2008/2013) and 400 million ringgit Senior Unsecured Bonds (2008/2023). All the long-term ratings have a stable outlook.

GIC's ratings remain supported by its unique position within the Gulf Corporation Council (GCC) region, and the strong support from its shareholders, i.e. the governments of Kuwait, Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Oman.

GIC's mandate is to support the development of private enterprises and economic growth within the GIC region. Given its strategic role, the Corporation enjoys immunity and exceptions in terms of regional regulatory norms, including exemptions from asset nationalisation, currency controls and taxes.

For the first 9 months of FY Dec 2010, GIC reported a net profit of USD129 million, surpassing the USD91 million of the entire fiscal 2009.

Driven by the more encouraging economic outlook on the GCC, the performance of GIC's key principal investments, particularly those in metal- and petrochemical-related industries, have improved. While the Corporation recorded a larger share of profits from its subsidiaries and associates in the 9-month span, its dividend receipts for the year are expected to remain unchanged from historical levels given the nascent stage of its major principal investments.

GIC is perceived to have a healthy liquidity position; as at end-September 2010, its cash balances and available-for-sale securities amounted to USD633 million and USD2.5 billion, respectively.

Contrasting against the Corporation's USD565 million of debt repayments due in FY Dec 2011, these are adequate.

At the same time, GIC's overall risk-weighted capital-adequacy ratio (RWCAR) had increased to 30.23 percent (end-December 2009: 27.7 percent), backed by profit accumulation and revaluation gains on its equity investments.

Meanwhile, the deleveraging of its balance sheet eased its leverage ratio (total assets/equity) from 3.5 times to 2.8 times. While the expansion of the Corporation's equity investment portfolio will elevate both its RWCAR and leverage ratios, the management will maintain a prudent near-term minimum RWCAR of 20 percent and a maximum leverage ratio of 4 times.

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