Moody's places NIG's Baa2 ratings under review for downgrade

Moody's also placed the rating on the $475m Sukuk issued by NIG Sukuk Limited on review for downgrade. The rating action follows the significant deterioration of the company's portfolio value given the declines and volatility in local Kuwaiti and global financial markets.

Moody's rates NIG in accordance with its Global Rating Methodology for Investment Holding Companies, published in October 2007. Moody's last rating action on NIG was on 5th July 2007, when the rating agency assigned a rating to NIG's Sukuk.

NIG's market value leverage per 30th September 2008 amounted to 42%, significantly above Moody's expectation of 30% for the rating, following sharp declines on Kuwait's stock market. Accordingly, Moody's review will focus any corrective action NIG may take to restore its financial profile to levels more commensurate with its rating.

Ratings could be downgraded in the event that Moody's concludes that debt-to-market value leverage will remain significantly above 30% for a prolonged period of time, and that weak markets are likely to impact NIG's ability to perform divestments, which have always remained an important additional cash flow stream to shore up low dividend coverage. Conversely, if NIG initiates immediate measures to reduce market value leverage to no more than 30%, either by reducing debt or raising fresh capital, and maintains dividend cover above two times, ratings could be confirmed at their current levels.

Moody's notes that NIG's financing model has historically relied on fairly high short term maturities, which have always been rolled over by a number of largely local relationship banks. Moody's review will focus on near-term steps taken by NIG to adopt a greater share of committed longer term facilities to better reflect market uncertainty.

The review process is expected to be concluded by the end of January 2009.

National Industries Group (NIG), based in Kuwait City, is a publicly listed investment holding company, and one of the largest publicly traded companies in Kuwait with a market capitalisation of ca. KD1.2bn ($4.4bn) per end of September 2008. Its business includes strategic and financial stakes in companies across Kuwait and the GCC, focusing primarily on building materials, specialist engineering, petrochemicals, finance, real estate, oil & gas services and energy sectors.