UAE’s GGICO ratings on review for possible downgrade

Moody's Investors Service has placed the Baa2 long term local and foreign currency issuer ratings and provisional debt ratings of Gulf General Investment Company (GGICO) on review for possible downgrade, citing prospects of more difficult operating conditions in some of its key business lines and execution risk associated with the group's requirements to strengthen liquidity.
"Although GGICO's 2008 financial results are expected to be fairly strong, we believe that a larger-than-expected deterioration in some of GGICO's business lines, in particular real estate and related activities, could challenge the company to meet its financial parameters required to maintain its current rating going into 2009", said Philipp Lotter, Dubai-based Senior Vice President at Moody's and lead analyst for GGICO.
"Furthermore, material short term maturities and only moderate headroom under its existing bank covenants will require GGICO to shore up its liquidity position", Lotter added. "We are encouraged by the recent announcement of a mandatory convertible bond and a long-term syndicated banking facility, which the company is planning to issue over the first quarter of 2008."
GGICO was incorporated in the Emirate of Ajman in 1973 under the name of Arab Economists Corporation and is present listed on the Dubai Financial Market. Its founders and main shareholders are the Al Sari family, which owns 52% directly through Investment Group Ltd, a private company involved in real estate and oil related activities, and 1.5% indirectly. The remaining shares are owned mainly by GCC nationals. At year-end 2008, the company had AED 590 mln (USD 160.5 mln) in net profit.