KUWAIT - Kuwait Projects Company (Holding) K.S.C.P. (KIPCO), as the Obligor of Kuwait Projects Company Sukuk Limited, has experienced a downgrade in its ratings by Moody's (NYSE:MCO) Investors Service. The rating agency lowered KIPCO's Corporate Family Rating (CFR) to B1 from Ba3 and its Probability of Default Rating (PDR) to B1-PD from Ba3-PD. Additionally, the provisional ratings for the backed senior unsecured $3 billion Euro Medium Term Note (EMTN) program issued by Kuwait Projects Co SPC Limited were downgraded to (P)B1 from (P)Ba3, with the ratings on the backed senior unsecured bonds due in 2026 and 2027 also falling to B1 from Ba3. However, the (P)NP backed other short term rating was affirmed. All related outlooks are maintained at negative.
Moody's decision reflects concerns over KIPCO's market value leverage, which is expected to stay above 45% through 2024 and 2025, surpassing initial projections. The agency anticipates that the Funds From Operations (FFO) interest coverage will remain weak at 0.8 times in 2024, with a slight improvement projected for 2025 to about 1 times. Despite these challenges, KIPCO's liquidity is deemed adequate for the upcoming year, though the company faces significant bond maturities of $500 million each in October 2026 and February 2027. While Moody's believes KIPCO will secure financing in advance to address these maturities, any delays could significantly weaken the company's liquidity position.
The B1 CFR rating continues to recognize KIPCO's portfolio companies' strong market positions, proactive management efforts to bolster operating and financial performance, and the fact that around 60% of the portfolio value is comprised of publicly listed investments. Additionally, the company's shareholder linkages with Kuwait's ruling family are noted.
In response to the ratings action, KIPCO has informed Moody's of its intention to voluntarily withdraw from all Moody's ratings. This decision comes as the company navigates the financial implications of the downgrades. The information is based on a press release statement.
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