Fitch expects that future capital injections and additional material financial support to Gulf Air will be assumed directly by the government via Mumtalakat. In October 2012, a Royal Decree was issued by the King of Bahrain, allowing funding of approximately $490million to support Gulf Air from the state budget.
Fitch Ratings has affirmed Bahrain Mumtalakat Holding Company’s (Mumtalakat) long-term issuer default rating (IDR) and senior unsecured rating at ‘BBB’. Fitch has also affirmed Mumtalakat’s short-term IDR at ‘F3’. The outlook on the long-term IDR is stable. Mumtalakat’s $750million 5% notes, due 30 June 2015, and MYR300M Sukuk, due 03 Oct 2017 have been also affirmed at ‘BBB’.
The agency continues to apply its parent and subsidiary rating linkage methodology in rating Mumtalakat as it believes that a strong relationship exists between the company and the Kingdom of Bahrain (‘BBB’/Stable/’F3’), reflecting the strong relationship between the two.
Fitch Ratings believes that a strong relationship exists between Mumtalakat and Bahrain, following its parent and subsidiary rating linkage methodology. However, ratings that factor in implicit state support will always be subject to the very real event risk of changes in the political approach by the sovereign.
Mumtalakat is 100% owned by the Bahrain state and is the government’s investment arm. It was established in June 2006 as an independent holding company for the government’s non-oil and gas assets. The viability of Mumtalakat’s business model is dependent on continued strong linkages with the sovereign, its strategic importance as a holding company for the government’s non-oil and gas assets, and its low level of leverage relative to Bahrain’s rating.
Mumtalakat is an active investor in diverse business and industry sectors in over 35 commercial enterprises, nationally and internationally.
Mumtalakat has received government shares since its inception in state-owned enterprises, funds and free land, to manage and operate its subsidiaries. Although government support falls short of an explicit debt guarantee, Fitch considers Mumtalakat’s high profile and strategic role to mean that support would be provided if required.
Building material cos continue to hit by weak European demand
Weakening demand in Europe will keep the pressure on EMEA building materials firms in 2013, but efforts to cut costs should start bearing fruit, helping credit metrics remain stable or slightly improve, according to Fitch Ratings.
Growth in the sector will come mostly from emerging markets, benefitting the largest and most diversified companies.
European sales volumes were weaker than expected in 2012 as low demand spread beyond peripheral countries to major markets such as Germany, France and the UK. We expect volumes to continue falling in Western Europe in 2013 as the macroeconomic environment remains poor.
This low demand will also weigh on prices in the region. However, we expect prices across most of the rest of the world to improve. Solid demand in emerging markets should allow companies to pass on cost inflation to their customers, helping to stabilise margins. In North America major cement producers have already announced further price increases from January. This should enable the North American market to continue the better-than-expected price trend seen in 2012.
In the face of these uneven market trends, we expect issuers to maintain their focus on cash preservation and expect capex policies to be prudent in 2013. Companies should also start to see major benefits from cost cutting programmes they ramped up in 2012, in the form of both higher savings and fewer one-off restructuring costs this year, helping support credit metrics.