Moody's places Dar Al-Arkan on review

Moody's decision to place the ratings on review follows the company's reporting of marginally weaker operating performance in the first half of 2010 as compared to 2009 and higher shareholder remuneration payments than originally expected by Moody's resulting in some key credit metrics such as FFO/Debt at 23.5% being below the threshold of 25% originally set for the rating category while free cash flow for the period was also negative.

Moody's acknowledges that the company's interest coverage metric at 7.6 times and pre-impairment gross margins of almost 46% are above Moody's expectations for DAAR's Ba2 rating which will also be taken into account during the review process.

The review -- which Moody's expects to conclude by the end of October -- will focus on the year-to-date operating performance and how changing expectations with respect to how the Saudi homebuilding market is likely to evolve will impact the company's operating performance, investment and cash flow expectations going forward relative to the guidance we had originally provided for the rating.

Moody's last rating action on DAAR was implemented on 20 January 2010 when the rating agency assigned provisional (P)Ba2 PD and CF ratings to DAAR and (P)Ba2 ratings to Dar Al-Arkan International Sukuk Company II (DAAR ISC II) and the proposed USD Certificates (sukuk).

The principal methodology used in rating DAAR was Moody's "Global Homebuilding Industry Rating Methodology", published in March 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

DAAR, with headquarters in Riyadh, the capital of the Kingdom of Saudi Arabia, is among the leading real estate developers and homebuilders. Established by six Saudi families in 1994, 30% of the company's capital was floated on the Saudi stock exchange in 2007 and the company had a market capitalisation of ca. SR15bn at the end of 2009. Revenues in 2009 amounted to almost SR5.5bn and the company recorded net
income of SR2.1bn.