Standard & Poor’s (S&P) has downgraded six Dubai government-backed companies to junk status because it views the emirate’s government as unwilling or unable to provide them with financial support.
The S&P downgrades include DP World, the port operator considered one of the best assets in Dubai World, which is now restructuring $26bn of debt. The downgrade is despite assurances from Dubai World that DP World has been ringfenced from the restructuring process.
DP World, Emaar, Dubai Holding Commercial Operations Group have all been downgraded to BB+. Jebel Ali Free Zone, DIFC Investments and Dubai Multi Commodities Centre Authority have all been downgraded to B+.
Fitch Ratings has also cut Dubai Holding Commercial Operations Group to junk status.
S&P also downgraded Emirates Bank and National Bank of Dubai, now merged into Emirates NBD, to BBB. It also downgraded Mashreq Bank and Dubai Islamic Bank to BBB.
According to an agency statement, it considers the standstill agreement that Dubai World is seeking as a default, and added “the government is either unwilling or unable, or both, to provide extraordinary government support in the form of timely and sufficient financial support to those government-related entities that provide essential government services on its behalf.”
Moody’s had already downgraded the Jebel Ali Free Zone, Dubai Holding Commercial Operations Group, Emaar Properties and DIFC Investments to junk status, and downgraded Dubai Water & Electricity Authority (Dewa) and DP World to Baa2, two notches above junk.