Dubai-based industrial conglomerate ETA Group assigned 'BBB-' rating; outlook stable

"The rating reflects the group's leading local market positions in cyclical and competitive industries, a growing and diversified earnings base, dependence on fast-growing markets in the United Arab Emirates (UAE), and aggressive financial risk profile," said Standard & Poor's credit analyst Alf Stenqvist.

The rating includes a one-notch uplift to reflect implicit support from ETA's 52% ownership by and close relationship with the Al Ghurair family. At Dec. 31, 2006, the group had total debt of about UAE dirham (AED) 4.6 billion ($1.25 billion) and operating lease commitments of about AED750 million.

"Standard & Poor's expects that ETA will be able to offset increased debt levels related to expansionary investments with increased operating cash flows," Mr. Stenqvist added. "The rating also assumes that ETA's shareholding will be retained as at present and that the group's close relationship with the Al Ghurair family will remain."

Downside risk in the rating would primarily be related to weakening market conditions in the group's major home markets (UAE), or excessive debt levels from unexpected acquisitions or higher-than-expected shareholder returns. Upside potential is currently limited, but would likely be related to a combination of ETA successfully executing its growth plans and materially improving its financial risk profile.