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Tue 24 May 2011 08:07 PM

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Abu Dhabi's credit outlook stable amid unrest, says S&P

Ratings agency chief says risks are 'fairly balanced', while no change in rating imminent

Abu Dhabi's credit outlook stable amid unrest, says S&P
Abu Dhabis credit outlook is stable despite regional unrest, rating agency Standard & Poors said.

Abu Dhabi's credit outlook is stable despite regional unrest, rating agency Standard & Poor's said on Tuesday, adding it had not been mandated by the UAE to assign a rating to the Gulf Arab state.

Abu Dhabi, which accounts for more than 60 percent of annual gross domestic product of the UAE, the world's third largest oil exporter, is rated AA by S&P and rival Fitch Ratings.

"It's a stable outlook right now," Moritz Kraemer, head of sovereign credit ratings for Europe at Standard & Poor's told Reuters in an interview. "We think that the risks are fairly balanced, so neither an upgrade nor a downgrade is imminent."

The emirate's creditworthiness is underpinned by its 10 percent share of world oil reserves.

The UAE, which groups seven emirates including Abu Dhabi, has escaped public protests that have challenged autocratic regimes in neighbouring Bahrain and Oman.

Kraemer said Abu Dhabi's economic and financial indicators coupled with its massive oil reserves placed the emirate and seat of government in a position so favourable it compared with top-rated countries such as Norway.

Abu Dhabi plans to centralise sales of sovereign debt and curtail undisciplined issuance by state companies by creating a Debt Management Office (DMO).

The plan will affect Abu Dhabi's high-profile investment vehicles Mubadala, International Petroleum Investment Co (IPIC), Aabar, Tourism Development and Investment Co (TDIC), sources told Reuters last week.

Asked whether creating the DMO would affect the emirate's outlook, Kraemer said lack of coordination among Abu Dhabi's government-related entities (GREs) was a thing of the past.

"Before, the GREs were in the market without major coordination, it seemed, and stepping on each other's toes in the worst case," he said. "I think this is now pretty centralised and clear."

The UAE's top advisory council passed a new public debt law in December, paving the way for the Gulf Arab state's first sovereign bond issue.

Asked if S&P had plans for rating the UAE, Kraemer said the federation of emirates had not yet asked for a rating.

"They're talking about a bond issue ... which in the past has usually been one of the triggers when a sovereign would ask to get a rating," he said. "But currently we have no rating because we haven't received a mandate."