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National Industries Group Holding – KWD30mn Senior Unsecured Bond Rating Affirmed, with a Stable Outlook
(MENAFN- Capital Intelligence Ltd) Capital Intelligence Ratings (CI Ratings or CI) today announced that it has affirmed the issue rating of ‘BBB-’ assigned to the KWD30mn senior unsecured bond maturing in 2025 issued by National Industries Group Holding (NIGH). The Outlook on the rating is Stable.
The issue rating on this senior unsecured bond is in line with CI Ratings’ assessment of the financial strength of the issuer, NIGH. The rating balances negatives such as earnings volatility and in particular the high level of gross debt with management’s demonstrated ability to manage this volatility; while particular periods may show falls in profitability ratios, there has been no overall negative trend. The main driver of earnings volatility (and TCI) has been the substantial holdings of FVTPL and FVOCI investments, coupled with the volatility of GCC equity markets, in particular Kuwait. While all Boursa Kuwait indices fell in 2023, all have recovered in 2024 to date and this has had a positive impact on earnings and TCI at both the consolidated and parent company levels.
Satisfactory effective liquidity and the continued ready access to both debt capital markets and new long-term banking facilities are crucial rating drivers. The other main factors that support the rating are sound profitability at subsidiaries and associates, and the steady growth in dividends being paid to the parent company. Also supporting the rating are the diversified nature and high quality of the asset base and earnings streams – although the proportion of asset base encumbrance remains significant. Debt related ratios (especially when calculated using the net debt figure) improved following the April 2022 rights issue, however the still high level of gross debt remains a rating constraint. Ongoing and planned future asset disposals are intended to allow reductions in gross debt; management forecasts show significant overall reductions in debt levels throughout the 2024-28 period, especially on a net debt basis – although net debt rose again in Q1 24.
Management structure is stable and senior managers are experienced and capable; most have been with NIGH for many years. The strategy for future investments to be made aims to maintain a balance between private equity (PE) opportunities that offer high eventual longer-term gains and more liquid, dividend paying investments that can provide a predictable flow of cash to meet debt service obligations. With a number of the older PE investments moving towards a profitable exit, management expects to be able to achieve and then maintain a gently declining trend in net debt.
Although parent-only financials are not available for H1 24, consolidated figures show a strong recovery in earnings, with net profit for H1 of KWD42.3mn compared to KWD23.9mn for the same period of 2023. The portion attributable to the shareholders of the parent company was KWD30.2mn (H1 23: KWD13.5mn). Consolidated equity rose by KWD30.4mn to KWD695.7mn (end 23: KWD665.3mn), of which KWD522.4mn was attributable to the shareholders of the parent company. Total debt (much of which is at the parent level) rose to KWD745.1mn, while net debt rose to KWD546.7mn. Despite this the ratio of total debt to total equity fell very slightly.
Liquidity and Short-Term Debt Repayment Capacity
Effective liquidity is satisfactory, supported by large holdings of readily marketable securities and by what are currently still high cash balances; as at end-Q1 24, the latter were equivalent to 49% of the sum of ST debt and the current portion of LT debt. Of total debt at end-Q1 24, 45% was ST. This was made up of 10% in the form of the current portion of LT debt and 35% in the form of ST line maturities. However most of the latter is provided under very longstanding bank lines from a diversified panel of banks; most have been renewed annually for many years. Nonetheless, the high proportion of ST borrowings still constitutes a potential funding vulnerability. Despite this, given the high level of effective liquidity, CI believes ST debt repayment capacity to be satisfactory.
Rating Outlook
The Stable Outlook on the issue rating indicates that no change is expected during the period until maturity in February 2025.
Rating Dynamics: Upside Scenario
Given the short remaining period before maturity, any upward change in either Outlook or rating is seen as being unlikely.
Rating Dynamics: Downside Scenario
The most likely downside scenario would be a lowering of the Outlook on the issue rating to Negative. The nature of the business model is such that volatility in TCI is to be expected, and this in turn means deterioration in debt-equity ratios. However the experience to date has been one where such (sometimes quite sharp) swings are reversed after one or two quarters, returning ratios to an equilibrium. Such volatility would therefore not on its own trigger a lowering of the Outlook; this would require a more broadly based deterioration in financial metrics that appeared likely to be prolonged.
Contact
Primary Analyst: Rory Keelan, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Darren Stubing; E-mail: ...
Committee Chairman: Morris Helal, Senior Credit Analyst
About the Ratings
The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.
The information sources used to prepare the credit ratings are as follows: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s financial statements for FY2019-23 and Q1 2024. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.
The principal methodologies used to determine the ratings are the Corporate Rating Methodology, dated 3 May 2023 (see , the Bond Rating Methodology (see , and the Parent / Subsidiary Criteria, dated 27 April 2022 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at
This rating action follows an annual review of the issue. Ratings on the issue were first released in October 2019. The ratings were last updated in September 2023. The rating and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure. The ratings have been assigned or maintained at the request of the rated entity or a related third party.
Conditions of Use and General Limitations
The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.
Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.
The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.
Copyright © Capital Intelligence Ratings Ltd 2024
The issue rating on this senior unsecured bond is in line with CI Ratings’ assessment of the financial strength of the issuer, NIGH. The rating balances negatives such as earnings volatility and in particular the high level of gross debt with management’s demonstrated ability to manage this volatility; while particular periods may show falls in profitability ratios, there has been no overall negative trend. The main driver of earnings volatility (and TCI) has been the substantial holdings of FVTPL and FVOCI investments, coupled with the volatility of GCC equity markets, in particular Kuwait. While all Boursa Kuwait indices fell in 2023, all have recovered in 2024 to date and this has had a positive impact on earnings and TCI at both the consolidated and parent company levels.
Satisfactory effective liquidity and the continued ready access to both debt capital markets and new long-term banking facilities are crucial rating drivers. The other main factors that support the rating are sound profitability at subsidiaries and associates, and the steady growth in dividends being paid to the parent company. Also supporting the rating are the diversified nature and high quality of the asset base and earnings streams – although the proportion of asset base encumbrance remains significant. Debt related ratios (especially when calculated using the net debt figure) improved following the April 2022 rights issue, however the still high level of gross debt remains a rating constraint. Ongoing and planned future asset disposals are intended to allow reductions in gross debt; management forecasts show significant overall reductions in debt levels throughout the 2024-28 period, especially on a net debt basis – although net debt rose again in Q1 24.
Management structure is stable and senior managers are experienced and capable; most have been with NIGH for many years. The strategy for future investments to be made aims to maintain a balance between private equity (PE) opportunities that offer high eventual longer-term gains and more liquid, dividend paying investments that can provide a predictable flow of cash to meet debt service obligations. With a number of the older PE investments moving towards a profitable exit, management expects to be able to achieve and then maintain a gently declining trend in net debt.
Although parent-only financials are not available for H1 24, consolidated figures show a strong recovery in earnings, with net profit for H1 of KWD42.3mn compared to KWD23.9mn for the same period of 2023. The portion attributable to the shareholders of the parent company was KWD30.2mn (H1 23: KWD13.5mn). Consolidated equity rose by KWD30.4mn to KWD695.7mn (end 23: KWD665.3mn), of which KWD522.4mn was attributable to the shareholders of the parent company. Total debt (much of which is at the parent level) rose to KWD745.1mn, while net debt rose to KWD546.7mn. Despite this the ratio of total debt to total equity fell very slightly.
Liquidity and Short-Term Debt Repayment Capacity
Effective liquidity is satisfactory, supported by large holdings of readily marketable securities and by what are currently still high cash balances; as at end-Q1 24, the latter were equivalent to 49% of the sum of ST debt and the current portion of LT debt. Of total debt at end-Q1 24, 45% was ST. This was made up of 10% in the form of the current portion of LT debt and 35% in the form of ST line maturities. However most of the latter is provided under very longstanding bank lines from a diversified panel of banks; most have been renewed annually for many years. Nonetheless, the high proportion of ST borrowings still constitutes a potential funding vulnerability. Despite this, given the high level of effective liquidity, CI believes ST debt repayment capacity to be satisfactory.
Rating Outlook
The Stable Outlook on the issue rating indicates that no change is expected during the period until maturity in February 2025.
Rating Dynamics: Upside Scenario
Given the short remaining period before maturity, any upward change in either Outlook or rating is seen as being unlikely.
Rating Dynamics: Downside Scenario
The most likely downside scenario would be a lowering of the Outlook on the issue rating to Negative. The nature of the business model is such that volatility in TCI is to be expected, and this in turn means deterioration in debt-equity ratios. However the experience to date has been one where such (sometimes quite sharp) swings are reversed after one or two quarters, returning ratios to an equilibrium. Such volatility would therefore not on its own trigger a lowering of the Outlook; this would require a more broadly based deterioration in financial metrics that appeared likely to be prolonged.
Contact
Primary Analyst: Rory Keelan, Senior Credit Analyst; E-mail: ...
Secondary Analyst: Darren Stubing; E-mail: ...
Committee Chairman: Morris Helal, Senior Credit Analyst
About the Ratings
The credit ratings have been issued by Capital Intelligence Ratings Ltd, P.O. Box 53585, Limassol 3303, Cyprus.
The information sources used to prepare the credit ratings are as follows: public information and information provided by the rated entity. Financial data and metrics have been derived by CI from the rated entity’s financial statements for FY2019-23 and Q1 2024. CI may also have relied upon non-public financial information provided by the rated entity and may also have used financial information from credible, independent third-party data providers. CI considers the quality of information available on the rated entity to be satisfactory for the purposes of assigning and maintaining credit ratings. CI does not audit or independently verify information received during the rating process.
The principal methodologies used to determine the ratings are the Corporate Rating Methodology, dated 3 May 2023 (see , the Bond Rating Methodology (see , and the Parent / Subsidiary Criteria, dated 27 April 2022 (see Information on rating scales and definitions, the time horizon of rating outlooks, and the definition of default can be found at Historical performance data, including default rates, are available from a central repository established by ESMA (CEREP) at
This rating action follows an annual review of the issue. Ratings on the issue were first released in October 2019. The ratings were last updated in September 2023. The rating and rating outlook were disclosed to the rated entity prior to publication and were not amended following that disclosure. The ratings have been assigned or maintained at the request of the rated entity or a related third party.
Conditions of Use and General Limitations
The information contained in this publication including opinions, views, data, material and ratings may not be copied, distributed, altered or otherwise reproduced, in whole or in part, in any form or manner by any person except with the prior written consent of Capital Intelligence Ratings Ltd (hereinafter “CI”). All information contained herein has been obtained from sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error or other factors by third parties, CI or others, the information is provided “as is” and CI and any third-party providers make no representations, guarantees or warranties whether express or implied regarding the accuracy or completeness of this information.
Without prejudice to the generality of the foregoing, CI and any third-party providers accept no responsibility or liability for any losses, errors or omissions, however caused, or for the results obtained from the use of this information. CI and any third-party providers do not accept any responsibility or liability for any damages, costs, expenses, legal fees or losses or any indirect or consequential loss or damage including, without limitation, loss of business and loss of profits, as a direct or indirect consequence of or in connection with or resulting from any use of this information.
Credit ratings and credit-related analysis issued by CI are current opinions as of the date of publication and not statements of fact. CI’s credit ratings provide a relative ranking of credit risk. They do not indicate a specific probability of default over any given time period. The ratings do not address the risk of loss due to risks other than credit risk, including, but not limited to, market risk and liquidity risk. CI’s ratings are not a recommendation to purchase, sell, or hold any security and do not comment as to market price or suitability of any security for a particular investor.
The information contained in this publication does not constitute investment or financial advice. As the ratings and analysis are opinions of CI they should be relied upon to a limited degree and users of this information should conduct their own risk assessment and due diligence before making any investment or other business decisions.
Copyright © Capital Intelligence Ratings Ltd 2024
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