Saad Group and related entities outlook revised to negative on increased leverage

"The outlook revision reflects Saad Group's higher debt and vulnerability to further weakening financial markets after increasing its exposure to financial institutions substantially over the past six months, both within the Saad group and beyond through private investments by its key shareholder Mr. Maan Al-Sanea," said Standard & Poor's credit analyst Tobias Mock.

The Saad Group has increased its investments in financial securities by about $6 billion over the past six months. This was largely financed by debt, leading to an increase in the group's leverage to 34%, which is above the 30% threshold for the assigned rating category.

Standard & Poor's recognizes the credit strength of the new investments and improvements in the liquidity of Saad Group's assets. However, the concentration of risk in the financial sector is high and the risk of a weakening of the financial markets has substantially increased. This could negatively affect Saad Group's investment portfolio value at a time when the group has no leeway within the assigned ratings.

Saad Group is a conglomeration of international financial services, manufacturing facilities, investment companies, and health care, education, and real-estate development. The group's credit strengths include support from its major shareholder Mr. Al-Sanea. Saad Group had total assets of $24.2 billion at June 30, 2007. The group represented by far the largest asset and liability base for its main shareholder Mr. Al Sanea at Dec. 31, 2006. At June 30, 2007, however, a new investment vehicle owned by Mr. Al Sanea had built up substantial assets and liabilities with a focus on security investments in financial institutions. "Although we do not expect this entity to have any direct implications for the Saad group because it is ring fenced, there is however a possibility of indirect implications," said Mr. Mock.