Moody's changes Shuaa rating

Moody's Investors Service has downgraded the long-term foreign currency and local currency issuer ratings of Shuaa Capital by two notches to Ba1 from Baa2 and its short-term ratings to 'not-prime'. The rating outlook is negative. "The downgrade was prompted by the company's deteriorating fundamentals, especially its recurring profitability and weakening liquidity profile, which has become heavily reliant on short-term bank lines to finance illiquid assets," said John Tofarides, Analyst, Moody's Financial Institutions group based in Dubai. The downgrade was triggered by a two-notch reduction in Shuaa's baseline credit assessment (BCA) from 11 to 13 (on a scale of 1 to 21, where 1 represents the highest credit quality, ie Aaa). The 13 BCA is equivalent to a Ba3 rating. However, Moody's acknowledges a BCA of 13 also reflects the company's adequate capitalisation and leverage levels, as well as qualitative elements such as management quality and culture, Shuaa's established presence in the Gulf and good reputation, which will help it recover. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .