A plan by Qatar Holding, one of Qatar’s main state investment funds, to seek a credit rating will cast more light on its multibillion-dollar international investments after questions over some of its dealings in recent months.
Ahmad Al Sayed, the chief executive of Qatar Holding, a subsidiary of Qatar’s sovereign wealth fund, said on Tuesday that the fund was preparing for a rating in the coming months, which would force the global investor to be more transparent.
Qatar Holding has emerged as one of the world’s most high-profile investors in recent years — it has played kingmaker in the merger of Xstrata and Glencore and bought Harrods — but the expansion has led to closer scrutiny of the opaque sovereign wealth fund.
Trevor Cullinan, a sovereign analyst at Standard & Poor’s in Dubai said a rating would require “significant disclosure,” from the fund, which would join other rated government investors, such as Abu Dhabi’s Mubadala and Singapore’s Temasek.
Cullinan said: “We would usually see full financial statements and we would discuss in depth the entity’s investment strategy, so in that regard it would be a move forward.”
Although its debt profile is not public, Qatar Holding’s rating would be based on the levels of debt it has raised. “We have never been highly leveraged,” Sayed said on Tuesday, adding that the fund had close to zero debt on its balance sheet at the end of 2012, aside from real estate and project finance debt.
If Qatar’s balance sheet has little debt, analysts say it may indicate that leverage on its deals is saddled to the companies it has invested in, rather than its own balance sheet — a typical leveraged buyout structure for private equity investors.
The fund’s plans to seek a credit rating may also be an attempt to shore up its reputation after a UK investigation into its deal with Barclays at the height of the financial crisis, analysts said.
In January, the Financial Times reported that UK authorities were investigating whether Barclays gave a loan to Qatar to help fund the bank’s cash call in 2008. That came after last year’s announcement that the director of the UK’s Serious Fraud Office had started a formal investigation into certain “commercial agreements” between Barclays Bank and Qatar Holding in 2008.
“They are very worried,” about the reputational risk of the Barclays investigations, said one banker familiar with the fund.
It also emerged that Qatar Holding took a loan from Credit Suisse to help fund its stake in the Swiss bank, which was disclosed to and approved by Swiss regulators.
“It may well be that it’s a reputational thing — they feel their reputation has taken a bit of battering,” says Victoria Barbary, director of Institutional Investor’s sovereign wealth centre in London.
In January this year, Qatar Holding appointed Finsbury as its public relations representative.
A credit rating would also allow Qatar Holding to borrow separately from the sovereign, which already has a Aa2 rating from Moody’s Investors Service and an AA rating from Standard & Poor’s. But Cullinan pointed out that it did not necessarily mean that Qatar Holding would automatically be planning to borrow internationally.
Over the years, Qatar has increased its overseas acquisitions. In 2011 for example, Qatar’s outflows of capital increased almost sixfold to $62.6 billion from $10.7 billion in 2010, with more than a third of capital outflows as foreign direct and portfolio investment, according to Barclays Capital estimates.
“In the last two or three months there’s been a lot of increased scrutiny of Qatar’s public finances and whether it’s overextending itself,” said one observer, who declined to be named.
— Financial Times
