Ratings agency downgrades Dubai corporates to junk status

09 December 2009

Moody’s predicts state-backed firms likely to have repayment problems

Ratings agency Moody’s has downgraded all the Dubai government-backed companies it rates to junk status, meaning it considers them likely to have repayment problems in the future.

The firms affected are DP World, Emaar, Dubai Holding Commercial Operations Group, Jebel Ali Free Zone, Dubai Water & Electricity Authority (Dewa), and DIFC Investments.

Moody’s had downgraded all six firms on 26 November, but had kept DP World and Dewa at Baa2, two notches above junk status. It has now reduced the ratings on all six firms further, bringing DP World and Dewa into junk bond status.

The agency said the downgrades “follow recent comments and statements from government officials, which cause us to believe that no meaningful government support should be assumed for any entity that is not directly part of or formally guaranteed by the government.”

Standard & Poor’s had already rated all six firms at junk status on 3 December.

Fitch Ratings has also downgraded Dubai Holding Commercial Operations Group to junk status and Thor Asset Purchase Company, a securitisation vehicle for Dewa, to BBB-, which is still at investment grade level.

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