Research Update: Dubai-Based Damac Real Estate Development Ltd. Upgraded to 'BB-' On Strong Presales Traction; Outlook Stable

We believe that Damac Real Estate Development Ltd. (Damac)'s growth prospects have improved thanks to a much stronger than expected presales momentum in late 2021 and the first five months of 2022 that significantly enhanced revenue visibility for the next two to three years. Given our expectation of very healthy operating cash flow in the next two to three years, the potential resumption of dividends in case of sukuk holder consent to a covenant amendment would not materially weigh on Damac's credit ratios. Equally, an estimated 10% asset carve-out, contemplated as part of the corporate reorganization plan, would not affect our assessment of the group's business or financial risk profiles. We therefore raised to 'BB-' from 'B+' our long-term issuer

...- We believe that Damac Real Estate Development Ltd. (Damac)'s growth prospects have improved thanks to a much stronger than expected presales momentum in late 2021 and the first five months of 2022 that significantly enhanced revenue visibility for the next two to three years. - Given our expectation of very healthy operating cash flow in the next two to three years, the potential resumption of dividends in case of sukuk holder consent to a covenant amendment would not materially weigh on Damac's credit ratios. - Equally, an estimated 10% asset carve-out, contemplated as part of the corporate reorganization plan, would not affect our assessment of the group's business or financial risk profiles. - We therefore raised to '##-' from 'B+' our long-term issuer credit and issue ratings on Damac and its outstanding $332 million sukuk maturing in April 2023, for which the key terms and the underlying asset pool will be unchanged if and when the corporate reorganization proceeds. - The stable...

Research Update