Moody’s rates Sobha sukuk Ba3

Moody’s Investors Service said it assigned a Ba3 rating to Sobha Sukuk Ltd.’s planned benchmark-sized senior unsecured sukuk. The issuer is a special purpose vehicle established by PNC Investments LLC (PNCI), which operates as Sobha Realty. The agency also assigned PNC a Ba3 corporate family rating and a Ba3-PD probability of default rating. The outlook is stable.

In a press release, Moody’s noted PNC’s gross margin in the mid-30% and “its strong financial metrics with debt to EBITDA of 1.4x and debt to book capitalization of 21% as of the end of 2022 as well as prudent financial policies targeting net debt to EBITDA of less than 2.75x through the cycle.”

However, it has a short track record, its business is focused on Dubai, which is a highly competitive market, the agency said.

“The alignment of the sukuk's rating with that of PNCI's Ba3 CFR is because certificate holders are effectively exposed to the creditworthiness of PNCI for the periodic distributions (akin to coupon payments) and principal repayment of the sukuk,” Moody’s said.

Moody’s said it expects strong demand for new build property over the next 12 to 18 months, which accounts for the stable outlook.

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