Global Arab Network | Due to Conflicts, Dubai Holding Group Drops S&P as Rating Agency

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Due to Conflicts, Dubai Holding Group Drops S&P as Rating Agency

Global Arab Network - - George Haddad

Monday, 25 January 2010 15:12

Dubai Holding Commercial Operations Group (“DHCOG”) has dropped Standard and Poor’s (“S&P”) as its rating agency due to its lack of understanding of DHCOG’s business, its operations and relationship with the Government of Dubai, according to DHCOG’s press relase.

Global Arab Network has received the DHCOG’s press release, DHCOG stated that it 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. Therefore, DHCOG discredits and disagrees with the content of the latest S&P report dated 25 January 2010.

DHCOG assures the investor community that it will continue to work closely with other rating agencies and directly with investors in full transparency.

Earlier today, Standard & Poor's Ratings Services said that it has lowered its long-term corporate credit rating on Dubai Holding Commercial Operations Group (DHCOG) to 'B' from 'BB+', assigned a negative outlook, and removed it from CreditWatch with negative implications, where it had been placed on April 30, 2009.

“We subsequently withdrew the rating due to what we consider to be inadequate timeliness of information and insufficient documentation provided by DHCOG to maintain our surveillance.” Standard & Poor's Ratings Services press relase 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," said Standard & Poor's credit analyst Pierre Georges.

This is based on its expectations of lower sales and lower selling prices of real estate units, and still high cash outflows related to new investments. Standard & Poor's Ratings Services believes that DHCOG's exposure to the severe downturn in the Dubai real estate market also constrains its credit quality.
Standard & Poor's Ratings Services stressed that free cash flows are likely to be negative for 2009 and 2010, which It believes will deteriorate DHCOG's liquidity position and could ultimately weaken its ability to meet its 2010 debt maturities.

The lower rating also reflects what Standard & Poor's Ratings Services sees as a continued lack of information from DHCOG, and consequently lower certainty, about ongoing support from the Dubai government, which it previously factored into the rating as a key credit strength.
Standard & Poor's Ratings Services now does not factor any ongoing government support into its rating because of this lack of information.
Finally, Standard & Poor's Ratings Services also sees the lack of market transparency, reliable market data, and the level of available financial information, which it considers low, as other negative factors for the rating on DHCOG, especially considering what it views as the currently depressed market environment in Dubai.

Standard & Poor's Ratings Services believes these negative factors currently largely outweigh what seen as DHCOG's strong position in the Dubai real estate market; its stable, albeit relatively limited rental income from investment properties (free zones); and strong asset base.

"Given these uncertainties and what we consider to be an inadequate timeliness and level of financial information we expect to receive, we have determined that we cannot maintain our surveillance and have decided to withdraw the rating," said Mr. Georges.

The negative outlook at the time of the rating withdrawal reflects its view on the challenges stemming from the currently depressed economic conditions, which it believes could further hamper DHCOG's future cash flow generation and liquidity profile. It also reflects its view on the implications of this difficult environment for DHCOG's refinancing capabilities.

Global Arab Network

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