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Six Dubai GREs Downgraded Following Review Of Extraordinary Government Support; Still On Watch Neg

Following the Nov. 25, 2009, announcement that Dubai World and its subsidiary Nakheel intend to request a six-month standstill agreement on their debt obligations, Standard & Poor's has revised its expectation for the likelihood of extraordinary support from the Dubai government to "low" for the six Dubai government related entities (GREs) that it rates.

This second downward revision follows statements made by the Dubai Department of Finance that, in our view, have helped clarify the Dubai government's position on the question of extraordinary financial support for its GREs. Standard & Poor's has interpreted the Department's statements to mean that that the Dubai government expects that creditors should lend to its GREs on the basis of their stand-alone credit quality, rather than any perception of timely government support.

Standard & Poor's is consequently lowering the issuer credit ratings on these six GREs to a level that reflects their stand-alone credit profiles (SACPs), without the benefit of extraordinary government support.

The six GREs remain on CreditWatch negative while Standard & Poor's continues to monitor their respective SACPs in light of possible further market deterioration.

DUBAI, Dec. 3, 2009--Standard & Poor's Ratings Services today said it has lowered its issuer credit ratings on six Dubai-based GREs: DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone (FZE), Dubai Multi Commodities Centre Authority (DMCC), Dubai Holding Commercial Operations Group LLC ( DHCOG ), and Emaar Properties PJSC. The issuer credit ratings on these six GREs remain on CreditWatch with negative implications, where they had originally been placed on Nov. 25, 2009. The rating actions are detailed in the "Ratings List" below.

"The rating actions reflect our lowered expectations regarding the likelihood of extraordinary support from the Dubai government for the six GREs," said Standard & Poor's credit analyst Farouk Soussa, "And we now consider the likelihood of extraordinary government support for these GREs as low. The issuer credit ratings on these six GREs are based on our opinion of their respective stand-alone credit profiles and include no notches to reflect extraordinary government support."

The rating actions also reflect Standard & Poor's opinion that the Dubai government (not rated), while committed to supporting the ongoing operations of its GREs, does not consider these GRE's credit standing or financial obligations as its priority responsibilities. Consequently, Standard & Poor's believes that the government's willingness to provide sufficient and timely support to its GREs is difficult to predict at this stage. This is reinforced by the Dubai government's recent comments stating its belief that Dubai World "should receive financing based on the viability of its projects, not on government guarantees".

Our lowered expectations for Dubai's extraordinary government support of the six GREs and our rating actions (today and on Nov. 25, 2009) also follow the Nov. 25 announcement by Dubai World (not rated) of the six-month standstill agreement on its debt obligations and those of its subsidiary Nakheel (not rated).

Under its criteria for rating GREs (see "Enhanced Methodology and Assumptions For Rating Government-Related Entities" in "Related Research" below), Standard & Poor's will rate a GRE above its SACP when it expects that the relevant government will offer extraordinary support if the GRE becomes financially distressed. The recent announcements, in Standard & Poor's opinion, do not create such an expectation of extraordinary support.

Moreover, under Standard & Poor's default criteria (see "Rating Implications of Exchange Offers and Similar Restructurings" below), a standstill is considered a default. Standard & Poor's is of the opinion that, as evidenced in the case of Dubai World and Nakheel , the Dubai government is either unable or unwilling, or both, to provide extraordinary government support in the form of timely and sufficient financial support to those of its GREs that provide essential government services on its behalf.

The CreditWatch placements on the six GREs reflect our ongoing review of the implications stemming from the standstill announcements. They are also based on our opinion of the potential for future access to financing for these six GREs. We plan to resolve these CreditWatch placements within the next three months following further analysis of the GREs and the developing conditions in Dubai. We will also review the implications of the debt restructuring at Dubai World on its rated subsidiaries: DP World , FZE, and DMCC. We understand that the loan documentations for these three GREs do not feature cross-default provisions linked to either Dubai World or to Nakheel .

Standard & Poor's has requested, and expects to receive, information on these points from the six GREs.

Related research
Rating Implications of Exchange Offers and Similar Restructurings, May 12, 2009

Enhanced Methodology And Assumptions For Rating Government-Related Entities, June 29, 2009

What Factors May Affect S&P's View Of The Likelihood Of Extraordinary Government Support For Dubai-Based GREs? Oct. 15, 2009

Ratings list
Downgraded/Affirmed/CreditWatch Action
To From Issuer credit ratings

DIFC Investments LLC
B+/Watch Neg/B BBB-/Watch Neg/A-3

DP World Ltd.
BB+/Watch Neg/B BBB-/Watch Neg/A-3

Dubai Holding Commercial Operations Group LLC
BB+/Watch Neg/-- BBB+/Watch Neg/--

Dubai Multi Commodities Centre Authority
B+/Watch Neg/B BB/Watch Neg/B

Emaar Properties PJSC
BB+/Watch Neg/-- BBB-/Watch Neg/--

Jebel Ali Free Zone (FZE)
B+/Watch Neg/B BBB-/Watch Neg/A-3

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© Press Release 2009