Moody's snips Arabian Centres

Moody's Investors Service said it downgraded to Ba3 from Ba2 both the corporate family rating of Arabian Centres Co. (ACC) and the backed ratings of sukuk certificates issued by Arabian Centres Sukuk Ltd. and Arabian Centres Sukuk II Ltd. The outlooks on all entities have been changed to stable from negative.

“The downgrade of ACC's ratings reflects the company's persistently weak credit metrics amid the improved business fundamentals for mall operators in Saudi Arabia, and track record of aggressive liquidity management and financial policies. As of Sept. 30, 2023, ACC's leverage increased to 8.7x net debt/EBITDA from 8.1x as March 31, 2022, and fixed charge coverage declined to 1.9x from 2.3x (all metrics are Moody's-adjusted).

“The weakening in credit metrics was driven by lower Moody's-adjusted EBITDA (calculated excluding proceeds from non-core asset sales) as the company was implementing its tenant rotation program, and higher Moody's-adjusted gross and net debt as the company raised new debt to finance its expansion projects while continuing to pay sizeable dividends,” the agency said in a press release.

However, Moody’s said it forecasts ACC’s leverage to decrease to 7.5x-8x and fixed charge coverage to be around 2x in 2024.

The improved outlook reflects the view that ACC will maintain its credit metrics commensurate with the current rating, and there will be no erosion in the company's liquidity, the agency said.

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