Kuwait: Ratings to notes issued by Gulf Investment Corporation
Moody's Investors Service has assigned a Baa1 rating to the USD500 million senior unsecured floating rate notes issued by Gulf Investment Corporation (GIC). The notes, due in June 2010, are part of a USD1 billion Euro Medium Term Note Programme, rated at Baa1 by Moody's for senior unsecured notes. The Baa1 senior, unsubordinated debt rating is at the same level as both the Baa1 foreign currency deposit rating and the Baa1 senior unsecured bond rating already assigned to GIC.
The outlook for all ratings is stable.
Moody's existing ratings for GIC, of Baa1/Prime-2 for long- and short-term foreign currency deposits and C- for financial strength, reflect its unique business model that concentrates on GCC private equity investments, as well as its high levels of investment grade liquid assets, good operating efficiencies and solid short-term debt repayment ability. The ratings capture the institution's adequate financial performance, with a good capital position and satisfactory asset quality.
At the same time, the ratings reflect GIC's high reliance on funding from short-term repurchase activities, the difficulties in quickly exiting from its private equity investments, and the challenge of monitoring and managing the many risks inherent in its business model. In assigning the rating, Moody's stated that it believes that the government of Kuwait could and would provide additional support, in the event of need, in excess of the support to be expected from the other GCC state shareholders of GIC. Moody's bases such expected support on both the ownership interest by Kuwait and the responsibility for comprehensive consolidated supervision over GIC by the Kuwaiti authorities.
Earlier in 2005 Moody's announced plans to examine ratings of various government-related issuers (GRIs), including those of Gulf Investment Corporation, in line with the rating agency's 'joint-default analysis' methodology by the middle of the year. The likely result of the application of the new methodology will be that the deposit and senior unsecured ratings for Gulf Investment Corporation will be upgraded.
Gulf Investment Corporation is headquartered in Kuwait and reported assets at 31 December 2004 of US$7.3 billion.
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