Moody's downgrades ratings of gov't linked firms

Moody’s on Wednesday downgraded five government-linked firms in Dubai, citing tightened criteria for companies to receive government support.

DP World, DEWA, DIFC Investments, Jebel Ali Free Zone and Dubai Holding Commercial Operations all had their ratings downgraded by one notch after Dubai’s Government Support Fund disclosed the criteria government related issuers (GRIs) have to meet in order to be eligible for support.

The fund has said it would look at the sustainability of GRIs’ business plans, current support of existing financial creditors, and their prospects of fulfilling repayment obligations.

It has also said that GRI debt obligations that do not benefit from a guarantee are not regarded as obligations of the government, and that the government is under no obligation to extend support to any such company.

“Moody’s is therefore making a greater distinction between its view of the creditworthiness of Dubai’s GRIs and that of the Dubai central government,” the credit rating agency said.

DP World, DEWA, and DIFC Investments had their ratings lowered to A3 from A1, while Jebel Ali Free Zone and Dubai Holding Commercial Operations were downgraded to Baa1 from A3.

Emaar’s rating was unchanged at Baa1.

“Whilst we understand that the government is under no legal obligation to support the vast majority of its GRI debt...we believe that it is in fact highly likely to stand behind its GRIs because of their strategic and reputational importance,” Moody’s said.

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