Moody’s assigns provisional rating

Global credit rating agency Moody’s has assigned a provisional long-term ‘(P)Aa2’ rating to Qatar’s global Islamic bond (sukuk). The agency assigned the provisional rating to the proposed US dollar trust certificates to be issued by ‘SoQ Sukuk’ (State of Qatar Sukuk). The payment obligations associated with these certificates are direct obligations of Qatar, it said, adding the outlook is “stable”. Moody’s ‘(P)Aa2’ rating for the proposed sukuk is in line with Qatar’s ‘Aa2’ issuer rating and “stable” outlook, given that any direct government obligation whose repayment is handled by the state receives a rating equivalent to that of the government. The payment obligations for the sukuk and certain other obligations will be the direct obligations of Qatar, acting through its Ministry of Finance and Economy, as provided in certain agreements, undertakings and in the guarantee, Moody’s noted. A resource-driven economic boom in recent years has produced very high growth rates and boosted per capita GDP (gross domestic product) on purchasing power parity to the highest level in the world. Real GDP growth averaged 18% between 2006 and 2011, according to the IMF. Finding that Qatar is currently the leading exporter of liquefied natural gas, with a capacity of 77mn tonnes per year as of December 2011; it said at the same time, the prudent management of its hydrocarbon windfall has enabled the Qatari government to maintain the lowest fiscal break-even price in the GCC (Gulf Co-operation Council), while accumulating significant external assets. “These assets would act as a buffer in the event of a prolonged downturn in hydrocarbon prices,” it, however, cautioned. Stressing that Qatar’s ratings are “constrained” by economic, institutional and political factors, Moody’s said hydrocarbon production is likely to reach a ‘plateau’ in the near future, as liquefied natural gas capacity is limited by a self-imposed moratorium on the development of new hydrocarbon projects — which runs at least until 2015 — and by the continued slowdown in crude oil output. “This is likely to lead to an increase over time in the country’s fiscal break-even price against a background of continued high levels of government expenditure,” according to the report. Although the government holds large assets, the precise scale of the country’s net international investment position is not known, reflecting limitations in the coverage, quality, and timeliness of official statistics, it said. Moreover, Iran’s threat to close the Strait of Hormuz represents a low probability, high impact geopolitical risk, it added. from gulf times.