Global Arab Network | S&P Places Abu Dhabi-based Entities on Negative CreditWatch & Lowers Dubai-based GREs

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S&P Places Abu Dhabi-based Entities on Negative CreditWatch & Lowers Dubai-based GREs

Global Arab Network - - Gamal Ragay

Thursday, 08 April 2010 01:05

Standard & Poor's Ratings Services today said it had taken a number of rating actions on entities based in the United Arab Emirates (UAE):

* S&P placed the ratings on four Abu Dhabi-based government-related entities (GREs)--Tourism Development and Investment Company P.J.S.C. (TDIC), Mubadala Development Co. PJSC, International Petroleum Investment Company (IPIC), and Aldar Properties PJSC-–on CreditWatch with negative implications.
* S&P has lowered by one notch the ratings on DP World Ltd., Dubai Multi Commodities Centre Authority (DMCC), and Emaar Properties PJSC, which have been on CreditWatch negative since Dec. 2, 2009. The new ratings on Dubai Multi Commodities Centre Authority are on CreditWatch negative, while the outlook on Emaar Properties and DP World is negative. The ratings on DIFC Investments LLC and JAFZ Sukuk Ltd. remain on Creditwatch with negative implications.
* S&P has updated its view on the stand-alone credit profiles (SACP) and extent of government support factored into the ratings on UAE banks. S&P raised the number of notches added to the SACP of Abu Dhabi Commercial Bank (ADCB) and Dubai-based Mashreqbank to three and two, respectively. This led to a one-notch upgrade of Mashreqbank and a ratings affirmation for ADCB. The ratings on both banks were removed from CreditWatch negative, and the outlook on these two entities is negative.
* S&P has affirmed the ratings on National Bank of Abu Dhabi (NBAD), Sharjah Islamic Bank (SIB), and Dubai Islamic Bank (DIB). The ratings on DIB were removed from CreditWatch negative and placed on negative outlook, while the outlooks on SIB and NBAD are stable.
* The ratings on the notes issued by Thor Asset Purchase (Cayman) Ltd. were affirmed at 'BB+'.

The placement of the four Abu Dhabi-based GREs on CreditWatch negative reflects its reconsideration of S&P current practice--which under its GRE criteria is to equalize the ratings on these GREs with those on the Abu Dhabi sovereign--given that part of these entities' activities are of a commercial, rather than an exclusively policy-based, nature (see Related Research below).

The focus of S&P review will be on revisiting the extent of credit support gained by these entities' roles and links with the government of Abu Dhabi. S&P will also revisit its view on the SACPs of each entity, as S&P expects these are likely to become more important drivers of the ratings going forward. S&P expects to resolve the CreditWatch placements following further discussion with
the entities and the government of Abu Dhabi on these matters. S&P anticipates that downgrades of between one and two notches may occur on these four entities within a month.

The one notch downgrades of DP World, DMCC, and Emaar reflect S&P view of the SACP of these entities, and the fact that S&P does not incorporate into the ratings on these entities any expectation of extraordinary support from the government of Dubai. S&P has removed these entities from CreditWatch negative, where they were placed on Dec. 2, 2009.

S&P does not believe it has adequate visibility on the SACPs for DIFC and JAFZ to warrant taking them off CreditWatch. S&P expects to resolve these two CreditWatch placements shortly, and will consider whether it expects to receive, sufficient timely information to continue surveillance, or whether it would be more appropriate to suspend or withdraw the ratings. S&P will publish further information on each of the Dubai-based entities shortly.

As part of today's rating actions, S&P lowered the SACP of ADCB by one notch and simultaneously raised to three notches from two notches the uplift S&P factor in to the long-term rating on ADCB. As a result, S&P affirmed 'A/A-1' long- and short-term ratings on ADCB and removed them from CreditWatch negative, where they were placed on Nov. 30, 2009. The outlook is negative, reflecting its view of the ongoing pressure on ADCB's asset quality and capitalization. At the same time, S&P affirmed 'A+/A-1' long- and short-term counterparty credit ratings on NBAD. The outlook is stable.

In Dubai, S&P removed the ratings on Mashreqbank and DIB from CreditWatch negative, where they were placed on Nov. 26, 2009. S&P raised to two notches from one notch the uplift S&P factor in to the long-term rating on Mashreqbank, which led to the raising of the long-term counterparty credit ratings on the bank to 'BBB+'. S&P affirmed 'A-2' short-term counterparty credit ratings
on the bank. At the same time, S&P affirmed the 'BBB-/A-3' long- and short-term counterparty credit ratings on DIB. The outlook on Mashreqbank and DIB is negative, due to the pressure on these banks' financial profile from what S&P view as a difficult operating environment. At the same time, S&P affirmed the 'BBB/A-2' long- and short-term counterparty credit ratings on SIB. The outlook on SIB is stable.

S&P continues to expect extraordinary support to be available from the UAE authorities in cases of need for Mashreqbank, DIB, SIB, ADCB, and NBAD, given their systemic importance (defined as "high" for these banks and "moderate" for SIB). In S&P view, the government's attitude vis-à-vis these banks likely reflects their unique function in the financing of the economy. However, its view of the different capacity of each emirate to extend extraordinary support to banks in their territory results in different levels of support being factored in the ratings. Standard & Poor's believes that the UAE authorities have a strong incentive, as well as willingness and capacity, to preserve the stability of their banking sector. In S&P view, the UAE government has a strong track record of support toward the banking system, and it notes that it has taken several measures to boost liquidity in the recent past. However, S&P believes banks in Dubai and Sharjah are more reliant on the central bank of the UAE, which regulates banks in all of the emirates, whereas banks based in Abu Dhabi enjoy the strong backing of the financially stronger emirate.

RATINGS LIST

To                  From

Abu Dhabi Commercial Bank (ADCB)
Issuer credit rating
A/Negative/A-1      A/Watch Neg/A-1

Aldar Properties PJSC
Issuer credit rating
A-/Watch Neg/A-2    A-/Stable/A-2

DIFC Investments LLC
Issuer credit rating
B+/Watch Neg/B      B+/Watch Neg/B

DP World Ltd.
Issuer credit rating
BB/Negative/B       BB+/Watch Neg/B

Dubai Islamic Bank (DIB)
Issuer credit rating
BBB-/Negative/A-3   BBB-/Watch Neg/A-3

Dubai Multi Commodities Centre Authority (DMCC)
Issuer credit rating
B/Watch Neg/B       B+/Watch Neg/B

Emaar Properties PJSC
Issuer credit rating
BB/Negative/--      BB+/Watch Neg/--

International Petroleum Investment Company (IPIC)
Issuer credit rating
AA/Watch Neg/A-1+   AA/Stable/A-1+

JAFZ Sukuk Ltd.
Issuer credit rating
B+/Watch Neg/B      B+/Watch Neg/B

Mashreqbank
Issuer credit rating
BBB+/Negative/A-2   BBB/Watch Neg/A-2

Mubadala Development Co. PJSC
Issuer credit rating
AA/Watch Neg/A-1+   AA/Stable/A-1+

National Bank of Abu Dhabi (NBAD)
Issuer credit rating
A+/Stable/A-1       A+/Stable/A-1

Sharjah Islamic Bank (SIB)
Issuer credit rating
BBB/Stable/A-2      BBB/Stable/A-2

Thor Asset Purchase (Cayman) Ltd. (senior secured rating)
Senior secured debt*
BB+                 BB+

Tourism Development and Investment Company P.J.S.C.
Issuer credit rating
AA/Watch Neg/A-1+   AA/Stable/A-1+

Global Arab Network

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