Dubai, January 26: Credit rating agency Standard and Poor’s has assigned state-owned Dubai Holding a negative outlook and withdrawn its rating for the group because of a lack of information, it said on Monday.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 had 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 (Dubai Holding Commercial Operations Group) DHCOG 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 in a statement.
“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 in “full transparency.”
S&P’s credit analyst Pierre George had 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 upset for the debt-ridden emirate, which rocked global markets in November when it requested 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.
In its statement on Dubai Holding on Monday, 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.”
“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.”
Dubai Holding has several subsidiaries, including three real estate firms, Dubai Properties, Tatweer and Sama Dubai, that were supposed to merge with the giant property developer Emaar, before the latter pulled out in December describing the link-up as unfeasible.
Dubai World is currently negotiating with its creditors to restructure some 22 million dollars of debt owed by its troubled subsidiaries.
These include Nakheel, the real estate giant that was set to default on the repayment of Islamic bonds worth 3.5 billion dollars last month when the Dubai government stepped in to cover the debt after receiving a 10-billion-dollar bailout from its oil-rich neighbour Abu Dhabi.
—Agencies