Global Arab Network | S&P: Kuwait-Based Arab Investment and Export Credit Guarantee improves liquidity

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S&P: Kuwait-Based Arab Investment and Export Credit Guarantee improves liquidity

Global Arab Network - - John Short

Thursday, 25 March 2010 15:29

Kuwait__Arab_Investment_and_Export_Credit_Guarantee_Corp_-Dhaman

Standard & Poor's Ratings Services said today that it raised to 'AA' from 'AA-' its counterparty credit and insurer financial strength ratings on Kuwait-domiciled The Arab Investment and Export Credit Guarantee Corp. (Dhaman). The outlook remains stable.

"The upgrade reflects the company's improved liquidity following recovery of long-outstanding debts during 2009," said Standard & Poor's credit analyst Kevin Willis. This action has also improved the quality of capital, and Dhaman retains very strong capitalization. Its balance sheet characteristics fully support the company's business as an export credit and investment risk insurer.

In our opinion, these strengths are accompanied by the benefits of its multilateral status, reflecting its ownership by governments of the Arab region and its overtly political/economic development role for this region. It also benefits from strong financial flexibility afforded through its membership convention, particularly for recoveries for investment risk losses from relevant governments. Earnings are satisfactory, insofar as the company, which works to a political/economic development agenda, does not have target profitability as a core performance metric.

"We expect that Dhaman will continue to be very strongly capitalized in a controlled environment as insured commitment volumes increase, and as it meets its primary goal of servicing economic growth across the Arab region," said Mr. Willis. It will continue to benefit fully from its supranational shareholder support. Although not a key factor in the rating, the company will use its adequate profitability to support its expansion. Liquidity will continue to be very strong, but will diminish in absolute terms as transaction volumes rise.

While negative rating action is unlikely, this would be prompted by any wavering of shareholder support in terms of either capital raising, provision of liquidity, or loss recoveries, resulting in material weakening of capital adequacy or liquidity. Further positive rating action is unlikely in the medium term and is constrained by the relative lack of diversity in the exposures covered.

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