Moody's affirms ratings of Saad Trading Contracting & Financial Services Company and Saad Group

Ratings affirmed include the entity's Baa1 senior unsecured issuer rating and the Baa1 rating on $650m of Sukuk al Manafa'a issued through Golden Belt 1 Sukuk Company B.S.C.(c) ("Golden Belt"). The outlook on all ratings is stable.

"Despite a challenging market environment, STCFSC has made a number of efforts that have strengthened its credit profile, including diversifying its securities portfolio, extending its debt maturity profile and providing strong liquidity", says Philipp Lotter, a Senior Credit Officer at Moody's Middle East Limited in Dubai (DIFC) and lead analyst for Saad.

"Ratings currently remain constrained by the volatility of global equity markets, to which STCFSC is exposed, and some event risk urrounding the long term allocation of its substantial cash balance", Lotter adds.

STCFSC's ratings are affirmed based on a combination of factors, including the asset coverage that can be derived from its growing portfolio of securities and investment properties, as well as the additional operating cash flows the Saad Group generates from its real estate, construction and related services businesses. Over the past 12 months, STCFSC has significantly increased its investment portfolio, mainly via the acquisition of international banking shares and Saudi real estate.

Whilst these investments have resulted in an increase in debt, the company has at the same time benefited from sizeable injections of capital from its owner, Mr Maan Al-Sanea. At year-end 2007, STCFSC's cash balance exceeded its debt, thus providing ample liquidity in
addition to available committed bank lines. Whilst this cash will ultimately be re-invested into new asset classes, it is currently being
held to provide a cushion against volatile equity markets, to which STCFSC is exposed.

Moody's takes significant comfort from this prudent financial policy but the final decision regarding the allocation of the cash represents a degree of event risk, which the rating agency will be monitoring going forward.

Moody's factors into its rating of STCFSC uplift for shareholder support. In Moody's view, STCFSC and the Saad Group at large are managed as a wealth preservation fund for the Al-Sanea family, and are likely to see the shareholder's considerable fortune that is located outside of the group folded into the Saad Group over time. This view is supported by the zero-dividend policy that has been consistently applied throughout the group, a regular track record of cash and asset injections, and the owner's commitment to acting as lender of last resort to any of the group's entities, including STCFSC. Moody's regularly evaluates Mr. Al-Sanea's ability to provide timely support to the Saad Group and has concluded that, even with recent purchases of a material stake in HSBC that were made outside of the Saad Group, the shareholder retains ample liquidity that can support Saad, if and when required and in line with Moody's assumptions for STCFSC's rating.

Ratings could be upgraded if STCFSC continues to improve financial metrics, and in particular asset coverage, which may involve some of its available cash being used for debt reductions, and continued consistency of its sound investment strategy. At the same time, ratings could come under pressure, in the unlikely event that STCFSC's liquidity were used to invest in higher-risk asset classes, or in the event that shareholder support were to become conditional or restricted.

Moody's (P)Baa1 corporate family rating of the Saad Group is affirmed based on the substantial progress that has been achieved to date in
transferring key subsidiaries into the consolidating entity, and should be made definitive once substantially all of the group's assets are transferred to the Saad Group. Saad's corporate family rating continues to reflect the collapsed credit quality of the entire group and does not consider legal or structural subordination. Accordingly, the rating does not reflect the credit risk of any debt issuance at the holding company and indeed Moody's does not anticipate any debt to be raised at this level.

Saad Trading, Contracting and Financial Services Company Limited Partnership ("STCFSC"), headquartered in Al Khobar in the Kingdom of
Saudi Arabia, is a privately owned company with origins in construction and real-estate development. Recently, the company has built a
substantial long term investment portfolio mostly comprising of equity shares in the Saudi and international banking sectors, as well as
domestic land banks. The company is owned by Mr. Maan Al-Sanea (90%) and his family, who have significant onshore and offshore business interests.

Saadgroup Limited (SGL), based in the Cayman Islands, is set to become the ultimate parent of STCFSC, and other subsidiaries of the Saad Group.