S&P affirms Dar Al Arkan

Standard & Poor's said it affirmed the B+ long-term corporate credit rating on Dar Al Arkan and removed the rating from CreditWatch, where it was placed with negative implications on March 7.

The outlook is stable.

The action follows the company's sale of a land plot at the Shams Al Riyadh development to Saudi Basic Industries Corp. (A+/stable/A-1) SAR 742 million, its raising of new bank debt of $150 million and its continued strong operating cash flow in the first quarter of 2012, according to the agency.

The agency said that it could upgrade ratings if the company can consistently maintain adequate liquidity with a debt to EBITDA below 3.5x, versus 3.6x for the past 12 months to March 31.

The rating reflects the group's exposure to cyclical and capital-intensive property development activities as well as its financial risk profile, which is aggressive, the agency said.

These weaknesses are partly offset by Saudi Arabia's favorable demographics, economic fundamentals and structural undersupply of affordable housing, together with its fairly strong market position, large and conservatively valued land bank, market knowledge and consistently high margins, the agency noted.

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