(The following statement was released by the rating agency)
DUBAI/LONDON, July 24 (Fitch) Fitch Ratings has affirmed Qatar Real Estate
Investment Company P.J.S.C.'s (Alaqaria) Long-term Issuer Default Rating (IDR)
and senior unsecured rating at 'BBB+', and Short-term IDR at 'F2'. The Outlook
on the Long-term IDR is Stable.
KEY RATING DRIVERS
Strong Business Model
The ratings reflect Alaqaria's strong business model, robust lessor profile and
above-average lease duration for the region. Finance leases provide stable,
long-term rental income, which are underpinned by off-take arrangements with
Qatar Petroleum (QP) and government-related entities (typically 10-15 years'
duration), and operational lease agreements of between five and 25 years with
Low Counterparty Risk
The ratings also reflect Alaqaria's low counterparty risk, as most of its
projected income is due to come from strong credits, plus the benefits of a
guaranteed rate of return on its contracts with QP or QP-related entities. These
arrangements have provided Alaqaria with sound defensive qualities during the
region's property downturn. Fitch notes that the majority of income is generated
from QP, the government-owned national oil company, which benefits from a
predetermined internal rate of return. Around 85% of Alaqaria's rental and lease
income in 2012 was derived from QP, the government, and QP-related companies.
Relationship With State-Related Entities
Under Fitch's parent and subsidiary methodology, Alaqaria's 'BBB+' rating
benefits from a two-notch uplift from its standalone rating of 'BBB-'. This
reflects the company's strategic and operational relationship with state-related
entities as a leading developer of long-term rental housing projects for both
the state and corporate sectors in Qatar. Any change in government-implied
support, or government ownership of Alaqaria could also have negative rating
Improving Financial Profile
Alaqaria's financial profile has been improving for the past two to three years,
mainly due to increased cash generation
We expect Alaqaria to maintain an EBIT NIC cover over 4x in our forecast period
and gearing to be around 50%. Although we do not expect Alaqaira to continue
deleveraging at this rate, as new projects in the pipeline materialise, we
believe that Alaqaria's capitalisation and leverage metrics have improved
considerably in the past two years, supporting the current rating.
The ratings could be downgraded if there is a loss of preferential status with
the state or with QP, EBITDA margins are sustainably below 80%, a downturn which
leads to significantly lower net interest cover or a substantial increase in
leverage; or credit deterioration at the sovereign or QP.
The ratings could be upgraded if the company received formal support from the
State of Qatar.
LIQUIDITY & DEBT STRUCTURE
In August 2012 Alaqaria's USD300m Sukuk bonds were redeemed on the back of the
company's improved liquidity and obtaining a related party loan. Fitch believes
that any liquidity risk that could emerge will be mitigated by Alaqaria's
continued access to bank financing and government support if needed. The company
has a cash position of QAR201.3m as at FYE12 (QAR324.7m as at FYE11). Alaqaria
has no short-term refinancing risk until 2016, when the bilateral borrowings are
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Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:
Additional information is available on www.fitchratings.com. For regulatory
purposes in various jurisdictions, the supervisory analyst named above is deemed
to be the primary analyst for this issuer; the principal analyst is deemed to be
Applicable criteria, 'Corporate Rating Methodology', dated 8 August 2012, and
'Rating Sukuk', dated 16 August 2012 is available at www.fitchratings.com.
Applicable Criteria and Related Research:
Corporate Rating Methodology
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