Standard & Poor’s may downgrade Abu Dhabi entities

08 April 2010

Downgrades of up to two notches mooted for firms in UAE capital

Ratings agency Standard & Poor’s (S&P) has said it may downgrade four Abu Dhabi government-owned companies as it reassesses the likelihood of state support.

The four companies put on negative creditwatch are Mubadala Development Company, Tourism Development and Investment Company (TDIC), Aldar Properties, and International Petroleum and Investment Company (Ipic).

“The focus of our review will be on revisiting the extent of credit support gained by these entities’ roles and links with the government of Abu Dhabi,” says S&P. “We anticipate that downgrades of between one and two notches may occur on these four entities within a month.”

The move follows a similar downgrade of Abu Dhabi government backed firms by Moody’s in March because of the lack of an explicit government guarantee on their debts.

S&P currently rates TDIC, Mubadala and Ipic as AA, and Aldar as A-.

S&P said it may also be forced to suspend or withdraw ratings on DIFC Investments, the investment arm of the Dubai International Financial Centre, and a sukuk by Jebel Ali Free Zone, due to a lack of information.

The agency also lowered by one notch the ratings on three Dubai government-linked companies after removing assumptions of state support for the firms. DP World and Emaar Properties were downgraded to BB, and Dubai Multi Commodities Centre Authority (DMCC) to B. DMCC is still on creditwatch negative, while the outlook on Emaar Properties and DP World is negative.

S&P puts ratings on negative outlook, before then moving to negative creditwatch, and then potentially downgrading a rating.

“The one notch downgrades of DP World, DMCC, and Emaar reflect our view of the stand-alone credit profile of these entities, and the fact that we do not incorporate into the ratings on these entities any expectation of extraordinary support from the government of Dubai,” says the agency.

It also revised the stand-alone credit profiles and its view of the degree of government support factored into its UAE bank ratings.

It also affirmed its A ratings on Abu Dhabi Commercial Bank (ADCB) and removed it from creditwatch negative. The outlook is negative, reflecting S&P’s view of the ongoing pressure on ADCB’s asset quality and capitalisation.

S&P increased Dubai’s Mashreqbank rating by one notch to BBB+, but said the company had a negative outlook. It also removed the negative creditwatch on Dubai Islamic Bank, but kept the BBB- rating the same.

“The outlook on Mashreqbank and DIB is negative, due to the pressure on these banks’ financial profile from what we view as a difficult operating environment,” says S&P.

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