Qatar-based Nakilat removed from CreditWatch on high likelihood of state support; 'A+' rating affirmed; outlook stable

In addition, Standard & Poor's affirmed the 'A+' issue ratings on Nakilat's $850m senior secured bonds, as well as the 'A' issue rating on its $300m secured subordinated bonds.

At the same time, Standard & Poor's removed Nakilat's ratings from CreditWatch, where we had placed them with negative implications on June 30, 2009. The outlook is stable.

"The rating actions follow a review and the application of our revised criteria for government-related entities (GREs) to Nakilat, and an assessment of the company's stand-alone credit profile. The 'A+' rating on Nakilat, which is one notch lower than that on the State of Qatar (AA-/Stable/A-1+), reflects our opinion that there is an 'extremely high' likelihood that the state would provide timely and sufficient extraordinary support to Nakilat in the event of financial distress. We assess the stand-alone credit profile (SACP) of Nakilat to be 'BBB',"

said Standard & Poor's credit analyst Karim Nassif.

"As part of our recent review, we held discussions with both the Qatari government and Nakilat's management. These discussions reassured us of the Qatari government's commitment to Nakilat, a company that we believe is at the forefront of the state's long-term LNG strategy. For example, the close involvement of the Deputy Prime Minister of Qatar in negotiating the $950m third tranche financing in the summer of 2009 demonstrates Nakilat's close link with, and importance for, the State of Qatar," he added.

"We assess the SACP of Nakilat to have strengthened to 'BBB' from the upper end of the speculative-grade category. This reflects our view of Nakilat's 'strong' business risk profile but also its 'significant' financial risk profile. It also reflects Nakilat's improved liquidity position after the successful issue of third tranche financing under a $6.8bn limited recourse debt program that the company signed in December 2006," he said.

"We believe that Nakilat will continue to build out the remaining vessels to schedule and budget, and that the company will be the exclusive provider of shipping vessels for LNG distribution for the State of Qatar," he concluded.