Moody's downgrades Dubai Holding amid merger talks

Dubai Holding, the state-controlled entity that is in talks to merge with Emaar Properties, was downgraded to A3 BY Moody’s Investors Service on Tuesday.

The company was also placed on review for a possible further downgrade. Emaar’s rating was also placed under review for a possible cut.

"The rating actions reflect Moody's view that - despite the recently announced plans to merge both entities - both companies' business and financial profiles face continued fundamental challenges in the wake of difficult conditions in Dubai's property market," Moody's said.

Analysts on Monday raised doubts over the value of the land owned by the three units of Dubai Holding that developer Emaar is to merge with.

Emaar said the entity resulting from a proposed merger with three units of Dubai Holding, which include developers Sama Dubai, Dubai Properties and Tatweer, will have combined assets worth AED194bn ($52.85bn).

But there is speculation as to what these assets will consist of.

Analysts said they could include a significant land bank, although questions have been raised about how valuable this would be in the wake of the real estate collapse in Dubai.

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