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Mon 3 Jan 2011 08:46 PM

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Moody's cuts Dubai Holding unit bonds on credit deal

Moody's downgrades DHCOG bonds to B3 from B2 citing deal of converting $555m into credit facility

Moody's cuts Dubai Holding unit bonds on credit deal
RATINGS DOWNGRADED: Moodys maintain review for possible CFR, MTN and PDR downgrades (Getty Images)

Credit rating agency Moody's downgraded the bonds of Dubai Holding
Commercial Operations Group (DHCOG) on Monday, citing a deal with lenders to
convert a $555m revolving credit facility into a five-year term loan.

Moody's downgraded the notes of conglomerate Dubai Holding's main unit by
one notch to B3, while maintaining a review for possible downgrade of the
company's B2 corporate family rating (CFR).

The rating action followed a statement by DHCOG on December 30 that the
company had reached a deal with lenders to convert the $555m revolving credit
facility into a five-year term loan.

DHCOG, Dubai Holding's loss-making hospitality and property arm, had
extended for a third time the loan due on November 30, to December 30.

"Despite the limited information so far regarding the new terms,
Moody's believes that the banks may now be in a preferential position vis-a-vis
bondholders," said Martin Kohlhase, analyst at Moody's in Dubai.

Kohlhase said: "Moody's has accordingly reflected this by downgrading
the debt instruments' ratings to B3."

Moody's maintained its review for possible downgrade of the medium term note
(MTN) ratings and the probability of default rating (PDR).

Moody's said it was maintaining the PDR at B3 to indicate continued high
default risk until the capital market debt is refinanced over the next 14
months.

The agency said DHCOG had a $240m MTN maturing in July 2011 and a $500m MTN
in February 2012.

Moody's had downgraded DHCOG in June to B2 from B1 over the challenges in
Dubai's real estate market.

Dubai government-linked companies have been hit hard by the global financial
crisis and property collapse in the region.

DHCOG, a unit of the conglomerate owned by the Gulf Arab emirate's ruler,
took a big hit from its exposure to Dubai's property crash and said in June it
might sell assets to deal with its debt after posting a $6.2bn loss for 2009.

State-owned conglomerate Dubai World sent global markets reeling in 2009
when it requested a standstill on almost $25bn of debt. The company secured
unanimous approval for its restructuring plan in under a year.

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