Wed, Jan 27, 2010 - Page 11 News List

S&P turns sour on Dubai Holding


Credit rating agency Standard and Poor’s (S&P) has assigned state-owned Dubai Holding a negative outlook and withdrawn its rating for the group because of a lack of information, it said on Monday.

S&P said in a statement that it had assigned Dubai Holding “a negative outlook, and removed it from CreditWatch with negative implications, where it had been placed on April 30, 2009.”

The agency said it initially lowered the long-term corporate credit rating of the group to “B” from “BB+”.

“We subsequently withdrew the rating due to what we consider to be inadequate timeliness of information and insufficient documentation provided by DHCOG [Dubai Holding Commercial Operations Group] to maintain our surveillance,” it said.

Dubai Holding responded to S&P’s announcement by declaring that it has itself dropped S&P as a rating agency “due to its lack of understanding of DHCOG’s business, its operations and relationship with the government of Dubai.”

“Although DHCOG has been engaging with S&P and sharing adequate information frequently and in a transparent manner, S&P has, nevertheless, issued inaccurate statements coupled with factual errors that are misleading,” it said.

“Therefore, DHCOG discredits and disagrees with the content of the latest S&P report dated January 25, 2010,” it added.

The Dubai group said it would continue to work with other rating agencies and directly with investors with “full transparency.”

S&P credit analyst Pierre George said “the rating actions reflect our base-case scenario, based on the information we currently have, which notably incorporates materially-weaker-than-anticipated cash flow generation by DHCOG.”

The agency said it expected lower sales and lower selling prices of real estate units, and still-high cash outflows related to new investments.

S&P’s announcement is the latest blow to the debt-ridden emirate, which rocked global markets in November after requesting a six-month freeze on debt payments by Dubai World, Dubai’s largest conglomerate, in order to restructure it.

State firms in Dubai have since fallen from grace, with the government also saying it would not guarantee its corporates’ debts.

S&P said the lack of information from DHCOG has reduced certainty about ongoing support from the Dubai government, which it previously factored into the rating “as a key credit strength.”

“We now do not factor any ongoing government support into our rating because of this lack of information,” it said. “We also see the lack of market transparency [and] reliable market data, and the level of available financial information, which we consider low, as other negative factors.”

S&P said the group’s ability to meet its 2010 debt maturities could ultimately be weakened: “We believe that DHCOG’s exposure to the severe downturn in the Dubai real estate market also constrains its credit quality. We understand that free cash flows are likely to be negative for 2009 and 2010.”

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