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S&P Launches New GCC Credit Ratings Scale

DUBAI - A new regional credit rating scale for the Gulf Cooperation Council (GCC) countries was launched on Monday by Standard & Poor’s Rating Services.

GCC scale ratings will feature the identifying prefix gc. The scale features both long- and short-term ratings. The highest long-term rating is ‘gcAAA’ and the highest short-term rating is ‘gcA-1+’. The GCC includes Bahrain, Kuwait, Saudi Arabia, Oman, Qatar, and the United Arab Emirates.

“S&P started developing the GCC regional scale in early 2008, when local currency debt issuance was quite high,” S&P’s Middle East Regional Manager Jan Willem Plantagie said.

Plantagie said the new scale reflects demand from Gulf issuers and investors for an additional rating scale that helps them to better compare the relative credit risk of issuers and issuances across the region, and is expected to contribute to better informed, more liquid, and more efficient capital markets in the Gulf.

“Although local debt issuance peaked in 2006-2008, we expect a resurgence in local currency issuance over the coming years, driven by large financing needs for infrastructure development,
 stronger competition for funds in the GCC, and government initiatives to stimulate local bond markets, such as those being undertaken in Saudi Arabia,” Plantagie said.

He said that the anticipated launch of the GCC Monetary Union is also expected to drive demand for regional scale ratings.

The criteria used to analyze business risk, financial risk, and other elements of credit risk are the same for both regional and global scale 
ratings, he added.

Rob Richards, Standard & Poor’s Managing Director and Criteria Officer, said regional scale ratings could be assigned to any GCC-domiciled issuer, including corporates, banks, insurance companies, and sovereigns, 
at their request.

The GCC scale will cover a wide array of funding instruments issued in local currencies, including capital markets debt, project finance debt, bank loans, and Shariah-compliant obligations. Both GCC scale and global scale ratings can be assigned to issuers and issues, although the GCC scale is designed to facilitate comparisons of GCC issuers and GCC currency-denominated debt issues distributed in GCC member states.

abdulbasit@khaleejtimes.com