Standard & Poor's Ratings Services said today that it has lowered its counterparty credit and insurer financial strength ratings on Wethaq Takaful Insurance Co. K.S.C. (Closed) to 'BB+' from 'BBB-'.The ratings remain on CreditWatch with negative implications, where they were placed on May 27, 2009.
"The downgrade reflects our increasing concerns regarding the impact on Wethaq's financial strength of the situation at TID," said Standard & Poor's credit analyst Lotfi Elbarhdadi.
TID (The Investment Dar; not rated) has a 67% shareholding in Wethaq.
The negative CreditWatch status means that we may further lower the ratings, depending on the development of TID's financial situation. The ratings were originally placed on CreditWatch negative on May 27, 2009, following an announced default by TID on one of its sukuk issues.
Among the key features underlying our opinion on Wethaq's financial strength ratings, as a Takaful (Islamic insurance) player in Kuwait, was an implicit benefit of being part of a large Sharia-compliant shareholder.
We expect to resolve the CreditWatch status or update it within three months.
"The resolution timing will depend upon the outcome of TID's debt restructuring, and on obtaining more clarity on its financial situation and strategic positioning," said Mr. Elbarhdadi.
We will then focus on evaluating the impact of TID's ownership on Wethaq's financial flexibility (defined as its level of access to capital relative to its needs), competitive position, and investments. If the outcome of the review is negative, we may lower the ratings, but we expect the ratings to remain in the 'BB' category.
--Global Arab Network
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