By Tom Arnold
Rating agency cites financial challenges of parent company Dubai World as reason for move.
Dubai government-run entity Jebel Ali Free Zone’s (JAFZ) AED7.5bn ($2bn) sukuk had its credit rating slashed to A2 from A1 at Moody’s Investors Service on Wednesday.
Citing financial challenges facing JAFZ’s parent company Dubai World, the credit ratings agency also downgraded by the same level the foreign and local issuer currency issuer ratings of JAFZ and placed them under review for further possible downgrade.
Due to mature in November 2012, JAFZ’s sukuk was listed on the Dubai International Financial Exchange (DIFX) in 2007.
The downgrades were prompted by the deteriorating credit profile of Dubai World and its close commercial relationship with JAFZ, Moody’s said in a statement.
As JAFZ’s cash was managed through Dubai World’s treasury services and JAFZ’s surplus funds were held at Dubai World level, the agency felt JAFZ’s profile was not separable from that of its parent company.
Dubai World’s credit profile was likely to have been weakened by its exposure to the Dubai property market through its subsidiary Nakheel, which had a $3.5bn sukuk, guaranteed by Dubai World, due to mature in December 2009.
Further possible downgrades of JAFZ’s ratings would be dependent on the company’s financial results for the first half of 2009 and the condition of the Dubai economy, Moody’s added.
I am sure Moody's License in Dubai will also be downgraded...