Fitch Ratings has assigned Kuwait Projects Company Holding (KIPCO) a long-term Issuer Default Rating (IDR) of ‘BB’ with a Stable Outlook.
The ‘BB’ rating is derived by taking KIPCO’s blended income stream assessment (BISA) of ‘bb-‘ and applying a one-notch uplift for dividend diversification and no uplift for supplemental factors. The BISA reflects the weighted average credit quality of the dividend income streams from the investments minus one notch for their subordination.
By the end of our forecast horizon, we expect equity to contribute around 30 percent, Burgan Bank 23 percent, SADAFCO 17 percent, and Gulf Insurance Group 11 percent to KIPCO’s underlying dividends. Over 75 percent of the revenue of the investment holding was derived from a full rating analysis of the contributing entities.
The one-notch uplift for dividend diversification incorporates strong sector diversification across petrochemicals, consumer, banking and insurance and improving asset level diversification.
“We do not apply uplift for supplemental factors because stronger qualitative factors such as dividend control and stability are offset by weaker financial factors including dividend or interest and asset liquidity. We expect KIPCO to adequately manage significant upcoming debt maturities in 2023 and that liquidity should be comfortable over the next three years. However, we believe asset liquidity could be limited in times of stress,” Fitch commented on the rating.
KIPCO’s gross asset value is now well diversified across sectors with petrochemicals contributing 20 percent, banks 20 percent, consumers 17 percent, and asset management 10 percent, with the remainder from insurance, media, logistics, and real estate.
