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Wed 16 Sep 2009 10:24 PM

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Fitch affirms Abu Dhabi rating at 'AA'

Agency notes state-owned firms may eventually need gov’t help to service debt, however.

Fitch Ratings on Wednesday affirmed Abu Dhabi's Long-term foreign currency Issuer Default Rating (IDR) at 'AA' with a stable outlook.

The Long-term local currency IDR was also affirmed at 'AA', with a stable outlook and the Short-term foreign currency IDR at 'F1+'.

The UAE Country Ceiling, which applies to Abu Dhabi, was affirmed at 'AA+'.

"Abu Dhabi's strong balance sheet enables it to weather most conceivable shocks," said Charles Seville, Associate Director in the Sovereign group at Fitch.

''Over the past 12 months, the emirate has seen a fall in oil prices and a sharp drop in global equity prices, which has affected returns at its sovereign wealth fund, the Abu Dhabi Investment Authority.''

The agency also noted that state-owned companies are borrowing to support acquisitions and the strategic development plans of Abu Dhabi.

''With a variety of quasi-sovereign entities borrowing, the risk grows that one may eventually have to call upon the sovereign to help it service debts. Wholly or partly state-owned companies (excluding banks) have borrowed in excess of $18 billion on external bond and loan markets so far in 2009, some of it refinancing,'' Fitch added.

Meanwhile, fully state-owned enterprises owe $20.1 billon as of June 2009 according to official sources, it also noted.

Total external debt of Abu Dhabi, not including banks, is estimated at $56 billion (40% of GDP) as of 2008, below Kuwait's and the 'AA' median but above Saudi Arabia's.

Meanwhile, investment losses at ADIA (Abu Dhabi Investment Authority) during 2008 were, by Fitch’s estimates, in line with diversified global funds such as the California State Employees Retirement System (Calpers) and Norway's Government Pension Fund, which lost around 20%. Losses outweighed new investment inflows during a year of rising oil prices.

The agency added that external assets will have recovered some ground in 2009.

The government has confirmed to Fitch that its assets were still worth at least 200% of GDP in 2008, making Abu Dhabi's sovereign net foreign asset position one of the strongest of any rated country. Indeed, it is stronger than that of Saudi Arabia ('AA-'/outlook stable) and comparable to Kuwait's ('AA'/outlook stable).

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