S&P cuts ratings of 11 Saudi-listed firms

Standard & Poor’s Ratings Services (S&P) has downgraded at least 11 Saudi-listed firms after the agency cut its sovereign rating for Saudi Arabia and adopted a more negative outlook for the kingdom’s economy.

Saudi Basic Industries Corp.’s (SABIC) ratings were lowered to A-/A-2 from A+/A-1, while its outlook remains stable. S&P said the decision is due to petrochemical giant’s strong links with the Saudi government.

“We do not rate government-related entities with very strong links to the government, such as SABIC, higher than the government itself, since the government can influence the entity's financial policy and strategy, as well as industry regulation and taxation, among others,” S&P said.

The bulk of SABIC's assets are currently in Saudi Arabia.

Saudi Electricity Co. (SEC),which is majority owned by the government, saw its long-term corporate credit rating revised down to A- from A+, while its debt issue ratings were lowered to A- from A+.The utility provider’s outlook remains stable.

Saudi Telecom Co.’s(STC) long and short-term corporate credit ratings were revised to

A-/A-2from A+/A-1. The outlook is stable due to the telco’s strong market position and low leverage.

Ratings were also lowered for The Saudi Investment Bank, Saudi British Bank (SABB), National Commercial Bank (NCB), Al Rajhi Bank, Samba Financial Group, Riyad Bank, Banque Saudi Fransi and Arab National Bank, due to “a pronounced negative swing in Saudi Arabia’s fiscal balance.”

Last week, S&P downgraded Saudi Arabia’s sovereign credit ratings to A-/A-2 from A+/A-1 and maintained a stable outlook. The decision was based on its expectation that Saudi real gross domestic product (GDP) would fall below its peers. The kingdom’s debt burden is now seen to exceed 7 percent of GDP in 2016-2019. 

Write to Joumana Saad at joumana.saad@argaamplus.com