Global Arab Network | UAE - Mubadala ECP rating based on Abu Dhabi equalization

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UAE - Mubadala ECP rating based on Abu Dhabi equalization

Global Arab Network - - Rabih Serrai

Tuesday, 02 February 2010 11:44

Standard & Poor's Ratings Services said today that it assigned its 'A-1+' short-term debt rating to the unlimited euro commercial paper (ECP) program to be issued by Netherlands-registered special-purpose vehicle MDC - GMTN B.V. The same rating will apply to all issues under the program.

The notes under the program shall be issued on behalf of Mubadala Development Co. PJSC (AA/Stable/A-1+). An unconditional and irrevocable guarantee provided by Mubadala in respect of the notes satisfies the agency guarantee criteria and the rating on the notes is thus equalized with the short-term rating on Mubadala.

"The ratings on Mubadala, the Abu Dhabi government's principle vehicle for diversifying the local economy away from hydrocarbon revenues, is based on an equalization with the ratings on the government of Abu Dhabi (AA/Stable/A-1+)," Standard & Poor's credit analyst Farouk Soussa said. "This reflects our view that, as per our enhanced criteria for rating government-related entities, the economic role played by Mubadala is 'critical' to the government of Abu Dhabi, and the link between the company and the government is 'integral'. Thus, our assessment is that extraordinary support from the government of Abu Dhabi in the event of financial distress is 'almost certain'."

Moreover, Moody's Investors Service has assigned a Prime-1 short term rating to the proposed Euro Commercial Paper (ECP) Programme to be issued by MDC -- GMTN B.V. (MDC), wholly and irrevocably guaranteed by Mubadala Development Company (Mubadala).

Notes under the programme are direct, unconditional, unsubordinated and unsecured obligations of MDC and rank pari passu among themselves and equally with all other unsecured obligations of the issuer. The same applies to obligations of the guarantor. Notes will be governed by English law. Accordingly, the programme is rated at the same level as Mubadala's short term issuer rating, which is also Prime-1.

Mubadala's liquidity profile is strong and has improved significantly following recent long-term re-financing exercises, both of subsidiary debt (Dolphin Energy) and corporate obligations. The only near-term drawn maturity is a $100m private placement bond under Mubadala's GMTN programme due in June 2010. Present on-balance sheet cash is substantial and the shares in its six most liquid holdings carry a current value of around Dhs5.5bn ($1.5bn).

Mubadala is likely to commence moderate issuance under the programme, which will be fully supported by matching dedicated liquidity at all times.

Mubadala is a fully government-owned company in Abu Dhabi with a public policy mandate of assisting the development and diversification of the emirate's hydrocarbon based economy. Although Mubadala does not have an explicit written guarantee, the Government has verbally assured Moody's that it stands fully behind the company. Mubadala's issuer ratings are therefore aligned with those of the Government of Abu Dhabi at Aa2/Prime-1.

However, Mubadala's long term ratings were placed on review for possible downgrade on 9th December 2009, together with all other ratings of Abu Dhabi and UAE government related issuers (GRIs). The review was prompted by a need to re-validate, and possibly reconsider support assumptions following Dubai's decision to explicitly segregate its direct obligations from those of its GRIs, following which a decision was subsequently made to pursue a debt restructuring at Dubai World. Moody's expects to complete the review by March 2010.

The principal methodology used in rating Mubadala was Moody's Guide to Sovereign Ratings, published in December 2008 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. Moody's last rating action on Mubadala was on 27th April 2009 when it assigned a Aa2 to its GMTN bond programme.

Global Arab Network

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