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Saudis to Introduce Credit Rating Agency Rules

Saudis to Introduce Credit Rating Agency RulesSaudis to Introduce Credit Rating Agency Rules

Saudi Arabia’s capital market regulator will introduce rules for credit rating agencies next September, part of reforms aimed at modernizing the financial sector of the world’s top oil exporter.

The rules, which outline the conduct, activities and supervision of credit rating agencies, will help to develop the country’s capital markets, the Capital Market Authority said in a statement on Tuesday, Gulf Business reported.

To apply for a credit rating license, companies will be required to have a physical presence in the kingdom with a minimum capital of two million riyals ($533,000) or working capital that is enough for three months, whichever is higher.

Saudi authorities want to encourage companies to issue more bonds as a way to reduce excessive dependence on bank loans.

Also, public credit ratings will be needed to classify assets that banks must hold as part of stricter Basel III regulations, which are being phased in around the world.

 Claims to Survive

The company said in September this year that its accumulated losses as of August 31 stood at SAR2.689 billion, equivalent to 215 per cent of its paid-up capital.

Saudi Arabian construction firm Mohammad Al-Mojil Group (MMG) aims to collect between SAR700 and SAR900 million ($187-$240 million) in claims from other firms as part of a recovery plan to save the 60-year-old company, Reuters quoted executives as saying.

The firm is a victim of the volatility of the Saudi construction industry, showing how cost pressures and stiff competition can threaten companies despite the massive sums being ploughed into building contracts by the government. It over-extended itself during a boom, then was hit by a slump that followed a plunge of oil prices six years ago.

MMG’s shares have not traded on the Saudi bourse since July 2012, when they were suspended by the regulator after breaching rules relating to accumulated losses.

The company said in September this year that its accumulated losses as of August 31 stood at SAR2.689 billion, equivalent to 215 per cent of its paid-up capital. Saudi shares are suspended once losses pass 75 per cent of capital.

“By collecting all outstanding due claims and settlements, the anticipated amounts still wouldn’t be enough to cover the balance sheet, but it would be considered enough to allow ourselves to pay obligations to our employees’ end-of-service benefits, service overheads, and operating expenses,” Terry Smith, MMG’s chief operating officer, told Reuters.

Financialtribune.com