Fitch Ratings has assigned Arabian Centres Company (ACC), a Saudi Arabia-based real estate company, a final Long-Term Issuer Default Rating (IDR) of ‘BB+ with a Stable Outlook, and final senior unsecured rating of ‘BB+’. At the same time, Fitch has assigned the sukuk trust certificates issued through Arabian Centres Sukuk Limited (ACSL) a final rating of ‘BB+’, in line with ACC’s IDR.
On 26 November 2019, ACC issued USD500 million, 5.375% sukuk trust certificates due in 2024, which constitutes the company’s debut international Islamic bond. The final terms of the sukuk are materially in line with Fitch’s base case assumptions. ACC is using the proceeds of the issuance, as well as USD1.2 billion of new secured bank loans, to refinance debt, as well as for general corporate purposes.
The ratings reflect a balance of ACC’s strong business position with asset concentration and positive, although uncertain, external factors. ACC is the largest retail real estate company in Saudi Arabia (KSA) in the nascent, but growing, Saudi retail mall sector. Occupancy rates are 93% with a diverse tenant base, although there is a concentration of large key account tenants, many of them related parties. The lease maturity schedule is lumpy and operating environment factors such as the price of oil, government policy and geopolitics can significantly affect the rate and direction of retail growth, which can influence rents and valuations.
The senior unsecured rating reflects an adequate unencumbered asset pool. Although the trust certificates rank below secured creditors’ ring-fenced assets, sukuk holders rank pari passu with all unsecured debt. Unencumbered assets constitute 62% of the investment portfolio value, which equates to a strong 4.1x unencumbered asset ratio. —Zawya/Reuters