By Gavin Davids
Ratings agency dropped due to lack of understanding of Dubai Holdings business and operations.
Dubai Holdings Commercial Operations Group announced on Monday that it had dropped Standard and Poor’s (S&P) as its rating agency due to its lack of understanding of Dubai Holdings' business, operations and relationship with the Dubai government.
Dubai Holdings has assured the investor community that it will continue to work closely with other ratings agencies, along with investors directly to ensure full transparency.
Standard and Poor’s had initially cut its rating of Dubai Holding to B from BB+ before withdrawing its rating altogether, citing a ‘lack of information’ and its ‘materially weaker’ cash position.
In response to the move by S&P, Dubai Holding released a statement that said that it had engaged with S&P frequently and in a transparent manner.
The company said: “Although Dubai Holdings has shared adequate information frequently and in a transparent manner, S&P has nevertheless issued inaccurate statements coupled with factual errors that are misleading."
It added: "Therefore, DHCOG discredits and disagrees with the content of the latest S&P report, dated Jan 25, 2010.”
In a statement released to Reuters, Pierre Georges, S&P analyst,said: “We understand from the information we have gathered that cash flow generation for Dubai Holdings Commercial Operations Group is likely to be materially weaker than we initially expected, which in our view significantly deteriorates DHCOG’s liquidity position.”
S&P said that it doubted the Dubai government would lend the holding company support, and that the unit would face difficulty in obtaining refinancing.
On Sunday, DHCOG said that it had made about $100 million worth of scheduled distribution payments on three bonds over the next five years.
Whatever the merits of this news, its going to further hurt the reputation of Dubai. Transparency is everything, financial markets hate uncertainty more than bad news.