By Andy Sambidge
Rating agency revises outlook on DHCOG to stable after better operating performance
Fitch Ratings has revised the outlook on Dubai Holding Commercial Operations Group to stable after the Dubai Holding unit announced it had repaid a $500m bond.
The rating agency changed DHCOG's outlook from negative, saying it reflected the company's "good progress" with its non-core asset disposal programme, better than expected operating performance and reduced leverage in some sectors.
DHCOG, which owns the Jumeirah hotel chain and other investments, including a division that runs many of Dubai’s free-trade zone business parks, announced on Wednesday the full repayment of the bond which was due on February 1.
Fitch added that following the $500m payment, DHCOG had no significant maturities before 2014 as DHCOG's debt maturity profile had "some breathing space".
Moody's Investors Service also affirmed DHCOG corporate family rating and upgraded its probability of default rating.
Late last year, Moody's had warned that Dubai government-related entiries (GREs) such as DHCOG was likely to face refinancing risks.
Dubai Holding CEO Ahmad Bin Byat said in a statement that the company had “robust” hotels, telecoms, free-zone and property businesses contributing to cash flow and “continues to meet its financial obligations as and when they fall due”.
Bashar Al Natoor, director in Fitch's EMEA Corporates team in Dubai, said: "The disposal of non-core assets, mainly for Dubai Property Group, and the unwinding of its investments will give DHCOG the necessary financial flexibility to cope with the difficult real estate market in Dubai."
Al Natoor added that rentals and hospitality revenues through hotel group Jumeirah were "holding up relatively well and performing better than expected to date".
The regional turmoil affecting some of the main regional destinations has had a positive impact on Dubai's hotel, retail and residential sectors, resulting in better credit metrics and liquidity position albeit still considered weak, Fitch said.
Jumeirah Revpar has proved resilient, increasing by almost 3.8 percent in 2011. This was coupled with improved occupancy rates, which had increased by 2.8 percent in 2011.
Fitch added that DHCOG continues to benefit from Jumeirah Group hospitality income and contracted rental income from TECOM Investments and to a lesser extent Dubai Property Group (DPG).
Some of Dubai’s state-owned companies have faced problems paying debt after property prices in the emirate slumped by more than half from their peak in 2008 and frozen credit markets prevented them from selling securities.
The emirate, the second-biggest in the UAE, borrowed $20bn from the central bank, the Abu Dhabi government and its lenders in 2009.
Dubai and its related companies shoulder $129.3bn of debt, amounting to 149 percent of GDP, of which $15.5bn is due this year, according to Bank of America Merrill Lynch.