Kuwait Financial Centre's bond rating affirmed with stable outlook

The rating is underpinned by the Company's generally sound overall financial profile with its comfortable liquidity and low leverage, coupled with a much improved debt maturity profile.

Constraining the rating is the Company's modest recurring income, the volatility of its earnings given the substantial holdings of financial investments and the concentration of funding base. The Outlook is changed to 'Stable', reflecting the Company's return to profit and the prospects of improved performance, despite the currently challenging operating environment.

Between the bond issue in December 2011 and the repayment of FRN in July 2012, the Company's balance sheet in particular liquidity and debt level were inflated, disturbing a number of financial ratios. At end-September 2012, Markaz continued to maintain a sound overall financial position. The Company's liquidity was comfortable and supported by its relatively large holdings of quoted equities, which remained predominately in Kuwait and the GCC region. The Company has a low level of debt, although remaining concentrated with the bond facility constituting over three fourths of the total funding base. Apart from a very small secured facility, the Company continues to borrow on an unsecured basis and thus its asset base is largely unencumbered.

An area of weakness for the Company is that of earnings which remained modest and volatile. The Company's recurring portion of income is staunchly supported by its asset management and investment banking activities, although they remained modest in absolute money terms. The Company's operating and financing costs are generally well under control. The significant increase in financing costs in the first nine months of 2012 due to both the bond and FRN issues running concurrently over an approximately a six to seven month period. The Company's bottom line will, however, remain a subject to any volatility in its large financial investments portfolio.

At end-September 2012, Markaz remained a mid size investment company, with an overall sound financial profile - although earnings excluding fair value gains was slightly weaker. The Company holds an investment company license and falls under the regulation and supervision of the Central Bank of Kuwait (CBK) and the Capital Market Authority (CMA). The Company's financial ratios remained well within CBK's guidelines at end of the first nine months of 2012.