Moody’s affirms Dar Al-Arkan rating; revises outlook to stable

Moody’s Investors Service has affirmed the B1 corporate family rating of Dar Al-Arkan Real Estate Development Co., revising the outlook to stable from negative, the rating agency said in a note on Monday.

Moody’s also assigned a provisional (P)B1 rating with a stable outlook to the trust certificate issuance program of Dar Al-Arkan Sukuk Company Ltd, a special purpose company established in the Cayman Islands.

The agency’s decision to revise Dar Al-Arkan’s outlook to stable is driven by its expectations that developer’s operating environment will stabilize this year, and the Saudi government’s initiatives to support the non-oil sector will benefit the real estate industry.

“In addition, despite the challenging and uncertain conditions seen in 2016, (Dar Al-Arkan) has continued to demonstrate its financial flexibility to generate free cash flows in order to meet its debt obligations,” said Rehan Akbar, assistant vice president – analyst at Moody’s.

Dar Al-Arkan’s rating could be upgraded should the company exhibit stronger credit metrics, accompanied by a more balanced and stable revenue stream.

Meanwhile, downside risks to the rating include a weakening liquidity position ahead of its debt maturities, or further deterioration in the operating environment, Moody’s said.