Manama - Fitch Ratings has affirmed Bahrain Mumtalakat Holding Company's (Mumtalakat) Long-term Issuer Default Rating (IDR) and senior unsecured rating at 'BBB'. Fitch has also affirmed Mumtalakat's Short-Term IDR at 'F3'.
The Outlook on the Long-Term IDR is Stable. Mumtalakat's USD750m 5% notes, due 30 June 2015, and MYR300M Sukuk, due 03 Oct 2017 have been also affirmed at 'BBB'.
The agency continues to apply its parent and subsidiary rating linkage methodology in rating Mumtalakat as it believes that a strong relationship exists between the company and the Kingdom of Bahrain ('BBB'/Stable/'F3'), reflecting the strong relationship between the two.
KEY DRIVERS:
State Support: Fitch Ratings believes that a strong relationship exists between Mumtalakat and Bahrain, following its parent and subsidiary rating linkage methodology. However, ratings that factor in implicit state support will always be subject to the very real event risk of changes in the political approach by the sovereign.
Fully State Owned: Mumtalakat is 100% owned by the Bahrain state and is the government's investment arm. It was established in June 2006 as an independent holding company for the government's non-oil and gas assets. The viability of Mumtalakat's business model is dependent on continued strong linkages with the sovereign, its strategic importance as a holding company for the government's non-oil and gas assets, and its low level of leverage relative to Bahrain's rating.
State Development Strategy: Mumtalakat is an active investor in diverse business and industry sectors in over 35 commercial enterprises, nationally and internationally.
State Funding: Mumtalakat has received government shares since its inception in state-owned enterprises, funds and free land, to manage and operate its subsidiaries. Although government support falls short of an explicit debt guarantee, Fitch considers Mumtalakat's high profile and strategic role to mean that support would be provided if required.
Gulf Air Losses: Gulf Air has continued to generate significant operating losses and has required capital injections via its owner, Mumtalakat, to sustain its operations. Fitch expects that future capital injections and additional material financial support to Gulf Air will be assumed directly by the government via Mumtalakat. In October 2012, a Royal Decree was issued by the King of Bahrain, allowing funding of approximately USD490m to support Gulf Air from the state budget.
RATING SENSITIVITY GUIDANCE:
Sovereign Rating Change: A change to Bahrain's sovereign ratings, in the form of an upgrade or downgrade, would probably lead to a similar change in Mumtalakat's ratings, as their ratings are aligned.
Implied Support: Any change in the implied support of, commitment from, and ownership by the Bahrain government could have negative rating implications for Mumtalakat.
Raising Debt for Subsidiaries: If Mumtalakat were to raise substantial debt on behalf of its subsidiaries or further guarantee subsidiaries' debt, this would be considered a negative credit factor.
The Outlook on the Long-Term IDR is Stable. Mumtalakat's USD750m 5% notes, due 30 June 2015, and MYR300M Sukuk, due 03 Oct 2017 have been also affirmed at 'BBB'.
The agency continues to apply its parent and subsidiary rating linkage methodology in rating Mumtalakat as it believes that a strong relationship exists between the company and the Kingdom of Bahrain ('BBB'/Stable/'F3'), reflecting the strong relationship between the two.
KEY DRIVERS:
State Support: Fitch Ratings believes that a strong relationship exists between Mumtalakat and Bahrain, following its parent and subsidiary rating linkage methodology. However, ratings that factor in implicit state support will always be subject to the very real event risk of changes in the political approach by the sovereign.
Fully State Owned: Mumtalakat is 100% owned by the Bahrain state and is the government's investment arm. It was established in June 2006 as an independent holding company for the government's non-oil and gas assets. The viability of Mumtalakat's business model is dependent on continued strong linkages with the sovereign, its strategic importance as a holding company for the government's non-oil and gas assets, and its low level of leverage relative to Bahrain's rating.
State Development Strategy: Mumtalakat is an active investor in diverse business and industry sectors in over 35 commercial enterprises, nationally and internationally.
State Funding: Mumtalakat has received government shares since its inception in state-owned enterprises, funds and free land, to manage and operate its subsidiaries. Although government support falls short of an explicit debt guarantee, Fitch considers Mumtalakat's high profile and strategic role to mean that support would be provided if required.
Gulf Air Losses: Gulf Air has continued to generate significant operating losses and has required capital injections via its owner, Mumtalakat, to sustain its operations. Fitch expects that future capital injections and additional material financial support to Gulf Air will be assumed directly by the government via Mumtalakat. In October 2012, a Royal Decree was issued by the King of Bahrain, allowing funding of approximately USD490m to support Gulf Air from the state budget.
RATING SENSITIVITY GUIDANCE:
Sovereign Rating Change: A change to Bahrain's sovereign ratings, in the form of an upgrade or downgrade, would probably lead to a similar change in Mumtalakat's ratings, as their ratings are aligned.
Implied Support: Any change in the implied support of, commitment from, and ownership by the Bahrain government could have negative rating implications for Mumtalakat.
Raising Debt for Subsidiaries: If Mumtalakat were to raise substantial debt on behalf of its subsidiaries or further guarantee subsidiaries' debt, this would be considered a negative credit factor.
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