Tabreed debt rating put on negative watch

Standard & Poor's Ratings Services has placed its "BBB-" long-term corporate credit rating on the UAE's National Central Cooling Company (Tabreed) on CreditWatch with negative implications.

The ratings agency considers there could be a negative impact on short-term cash flow, partly reflecting increased capital expenditure, or higher levels of outstanding debt than previously considered within the rating category. And this inturn could adversely affect the company's ability to generate positive free cash flows by 2010.

In addition, Tabreed has presented revised financial forecasts that anticipate, among other things, a significant increase in the future capital expenditure programme.

"The CreditWatch placement follows Tabreed's announcement of its intention to implement a new business model under which the company may create a new asset holding company and divest existing and future assets into joint ventures," said Standard & Poor's credit analyst Karim Nassif.

At the same time, Standard & Poor's also placed on CreditWatch with negative implications its "BBB-" debt rating on the senior secured sukuk certificates due 2011 issued by Tabreed 06 Financing Corp., and its "BB" debt rating on the subordinated convertible sukuk certificates due 2011 issued by Tabreed 08 Financing Corp.