Moody's downgraded the corporate family rating of Tilal Development Co. SAOC to B3 from B1, with a negative outlook.
The agency also lowered Tilal Sukuk Co. Ltd.'s senior secured sukuk rating to B3 from B1.
The downgrade reflects Tilal's weaker-than-expected operating performance, which resulted in low fixed-charge coverage ratio of 0.7x and a high net debt to EBITDA of 18.1x, as of June 30.
The rating agency said the company's EBITDA improvement was dependent on the successful completion of its phase 2 extension project, comprising an extension of the shopping mall and additional office space and apartments. But the occupancy rate of the shopping mall is 60%, due to sluggish market conditions and fierce competition as more retail space becomes available in Muscat, Oman.
Moody's estimates the fixed-charge coverage ratio to remain around 1.0x and Tilal's net debt to EBITDA will remain high at around 15.0x.
The agency expects a slight EBITDA increase in 2020 because of new additional rental income from the new leased office buildings.
Tilal's liquidity profile has slightly improved with excess cash of 7.2 million Omani rials because it recently refinanced its 29.3 million rials of secured Islamic project finance loans with a new 37 million rials of secured Islamic term loan.
The negative outlook reflects the company's tight liquidity profile and its ability to maintain sufficient cash balance to service interest expense in the next 18 months.
As of Oct. 18, US$1 was equivalent to 38.49 Omani baisa.