DIFC, January 29, 2009 -- Moody's Investors Service today downgraded the long-term issuer rating of National Industries Group Holding National Industries Group Holding NIG NIG (S.A.K.) and the rating on the USD 475 million sukuk issued by NIG Sukuk Limited to Ba2 from Baa3. The outlook was changed to negative.

"Moody's concluded that steps already initiated and still contemplated or pending will not be sufficient to lower market value leverage to levels of 35% and below, which we would expect for a Baa rated investment holding company," said Martin Kohlhase, a Moody's Assistant Vice President and lead analyst for NIG NIG based at the DIFC/Dubai. He elaborated that " NIG NIG 's estimated market value leverage metric for the fiscal year ended was around 50% and Moody's anticipates that through likely near-term actions currently at the disposal of management, primarily asset sales, this metric could be lowered to levels of around 45% at best, commensurate with the Ba2 rating level."

Cash coverage -- dividend income to net interest expense -- at below 2 times is weak and Moody's expects any near term improvement to this metric to be challenging given the uncertainty and lack of visibility of dividend income in times of weaker operating performance. This is unlikely to be fully offset by lower finance expenses over the near term despite the current low-interest rate environment. Moody's notes that NIG NIG has historically relied on asset disposals to improve the availability of cash, which in our view is more difficult to maintain after stock market indices have fallen globally and may not prove to be a sufficiently sustainable source of cash to be relied upon at the higher rating category. In addition, the high portion of unlisted investments in the portfolio could result in further volatility in asset valuations in the future which has also been factored into the Ba2 rating.

Near-term investment and asset disposals proceeds could amount to nearly KD 120 million while additional intermediate measures, with a lower probability of being executed, could add up to a total of almost KD 150 million. This does not consider any improvements in the value of the underlying portfolio as Moody's believes that capital markets remain volatile and will unlikely advance by such magnitude over the next quarters that it could have a sufficiently material impact on NIG NIG 's portfolio value given the required targets. Moody's has also not factored in direct government support that could have a positive impact on NIG NIG 's credit profile. Any likely near-term government actions, such as an economic stimulus plan or share purchases in the Kuwaiti stock market, are likely to have an indirect impact only through either better access to funding from local banks or a mildly improving stock market.

NIG NIG 's ratings benefit from a diversified portfolio consisting of investments in seven main industries. In particular, NIG NIG 's portfolio shows below-average asset concentration, given its fairly large number of minority holdings. The ratings assume that long-term key shareholders representing around 53% of the equity-base remain supportive and that management is prepared to further monetise assets should immediate refinancing issues arise.

The negative outlook takes into account that NIG NIG continues to have a debt maturity profile that is geared towards the short-term and does not include a high proportion of legally committed facilities, which is partially mitigated by NIG NIG 's solid bank relationships and the long track record of successful extensions. The outlook could be stabilized if NIG NIG lowers market value leverage to sustainable levels of between 35% and 45% by applying disposal proceeds to a reduction of debt and continuously strengthens the cash coverage metric to levels of around 2.5 times.

Moody's rates NIG NIG in accordance with its Global Rating Methodology for Investment Holding Companies, published in October 2007 which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating NIG NIG can also be found in the Credit Policy & Methodologies directory. Moody's last rating action on NIG NIG was on January 19, 2009, when the rating agency downgraded the ratings to Baa3 from Baa2 and left the ratings under review for downgrade.

National Industries Group ( NIG NIG ), based in Kuwait City, is a publicly listed investment holding company, and one of the largest publicly traded companies in Kuwait. Its business includes strategic and financial stakes in companies across Kuwait and the GCC, focusing primarily on building materials, specialis omar 1.1:zy