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22 Jan 2013
London, 22 January 2013 -- Moody's Investors Service has today placed on review for possible
upgrade Aldar's B2 Corporate Family Rating (CFR), B2-PD
Probability of Default Rating (PDR), B3 rating for its AED3.75
billion sukuk (due in 2013 and issued by Sukuk Funding (No. 2)
Limited) and B3 rating for its USD1.25 billion bond (due in 2014
and issued by Atlantic Finance Limited) following the agreement by the
Board of both Aldar Properties PJSC and Sorouh Real Estate PJSC to recommend
the merger transaction to the shareholders.
The non-cash transaction will involve a share swap resulting in
new Aldar shares issued to Sorouh shareholders followed by Aldar assuming
the assets and liabilities of Sorouh on the effective date of the merger.
Moody's review of the combined group is likely to be concluded upon the
completion of the transaction which is subject to shareholder approval
and satisfaction of terms and conditions of the merger.
RATINGS RATIONALE
The decision to place the ratings on review for upgrade reflects our assessment
that the Aldar-Sorouh merger will be credit positive with the combined
group having a stronger and more conservatively positioned financial profile
than the current B2 rating suggests. Aldar is expected to benefit
from Sorouh's lower balance sheet leverage and going forward will
be able to gain from a stronger market position as well as cost synergies.
"The review could result in an upgrade subject to final merger conditions
and formation of a combined group with a conservatively positioned risk
profile" says Lynn Valkenaar, a Vice President - Senior
Analyst in Moody's Corporate Finance Group and lead analyst for Aldar.
The review process will focus on further merger details from an operational
and financial perspective including (1) strategic direction and plan under
the new management; (2) combined capital structure and its impact
on liquidity and debt maturity profile; (3) evolution of development
pipeline and recurring revenues across the asset portfolio; and (4)
governance structure and financial policies.
Moody's notes that the AED3.2 billion (USD871 million) transaction
between the Government of Abu Dhabi and Sorouh comprising infrastructure
reimbursement and residential unit sales is an additional indication of
the government's willingness to provide systemic support in order
to stabilize and consolidate the local real estate market. The
rating agency anticipates that the merged entity will benefit from the
government's plan to spend heavily over the next five years on development
projects such as infrastructure and social housing.
In conjunction with evaluating the impact of the transaction on Aldar's
B2 CFR and B2-PD PDR, Moody's will also assess the
impact on the B3 rated debt instruments where the one-notch differential
reflects the unsecured and subordinated status of bond/sukuk holders relative
to secured lenders.
Aldar Properties PJSC is one of the largest property developers in the
Emirate of Abu Dhabi, the largest of seven emirates that form the
United Arab Emirates (UAE). Aldar reported sales of AED6.7
billion (USD1.8 billion) for the financial year ending 31 December
2011 and a net profit of AED643 million.
Sorouh Real Estate PJSC is a publicly listed real estate company in Abu
Dhabi. The company reported revenue of AED3.8 billion (USD1.0
billion) for the financial year ending 31 December 2011 and a net profit
of AED383 million.
The principal methodology used in this rating was the Global Homebuilding
Industry published in March 2009 and Global Rating Methodology for REITs
and Other Commercial Property Firms published in July 2010. Other
methodologies used include Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of these methodologies.
The Local Market analyst for this rating is Martin Kohlhase, 9714-237-9544
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
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rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
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rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
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for additional regulatory disclosures for each credit rating.
Lynn Valkenaar
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
David G. Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places Aldar's ratings on review for upgrade following merger announcement
No Related Data.
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