Analysts have raised fresh concerns over the lack of transparency in companies linked to the Dubai government, in the wake of credit ratings agency Standard & Poor’s (S&P) withdrawing its rating on Dubai Holding.

S&P withdrew its rating on the investment group, which is owned by the emirate’s ruler Sheikh Mohammed bin Rashid al-Maktoum, on 25 January. It cited a lack of clarity about the company’s financial situation.

The rating was withdrawn after it had been downgraded from BB+ to B, which pushed the company further below investment grade to what is commonly called junk status.

S&P said the rating on Dubai Holding Commercial Operations Group (DHCOG) was withdrawn because of “what we consider to be inadequate timeliness of information and insufficient documentation to maintain our surveillance”.

Analysts say the move is a further blow to transparency in the region. “Clearly there is growing frustration in the ratings agencies about the level of disclosure coming from Dubai government-backed companies,” says one Dubai-based analyst.

“This is not a good sign for the direction of corporate transparency when there is so much concern about the state of Dubai’s finances,” adds a London-based Middle East fixed income trader.

“We understand that free cash flows are likely to be negative for 2009 and 2010, which we believe will deteriorate DHCOG’s liquidity position and could ultimately weaken its ability to meet its 2010 debt maturities,” according to an S&P statement over the withdrawal of its credit rating.

Analysts at Barclays Capital said in a research note published in early December 2009 that Dubai Holding was most at risk of a debt default after Dubai World.

The move follows the withdrawal of S&P’s rating of Abu Dhabi National Energy Company (Taqa) in 2009, after the agency said it was reviewing its methodology for rating government-backed companies.

S&P put the company’s AA rating on a negative outlook in June 2009 as a result of that review. This resulted in Taqa severing its relationship with S&P.