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Bond Market News
Arabian Centres Downgraded to B1 by Moody’s
November 18, 2024
Arabian Centres (ACC) was downgraded by a notch to B1 from Ba3 by Moody’s. The rating agency also downgraded backed senior unsecured ratings of sukuk issued by Arabian Centres Sukuk II Limited and Arabian Centres Sukuk III Limited by the same measure to B1. The downgrade reflects a continued deterioration in Arabian Centres’ financial position, marked by weakened credit metrics and liquidity. The company’s cash flow generation has been negatively impacted by rising tenant receivables and deteriorated collections, especially from related parties, which led to negative cash flow from operations of around SAR 60mn ($15.9mn) in the first nine months of 2024, a sharp decline from SAR 660mn ($175.7mn) in 2023. As of September 2024, ACC’s leverage (net debt-to-EBITDA) rose to 10.8x, up from 9.0x at the end of 2023, and fixed charge coverage dropped to 1.3x from 1.8x. The company’s debt-financed growth strategy, combined with large dividend payouts, has strained its liquidity. However according to Moody’s, with unrestricted cash and equivalents of SAR486mn ($129.4mn), ~SAR200mn ($53.2mn) available under its committed bank facilities and expected operating cash flow of around SAR460mn ($122.5mn) over the next 12 months, the company has sufficient liquidity to cover its debt obligations. ACC also plans to refinance the $875mn sukuk maturing in October 2026 in advance.
Its 9.5% 2029 sukuk dropped by 20cents to trade at 103.8, yielding 8.15%.
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