By Andy Sambidge
Ratings agency says mindful of near-term economic impact related to political unrest
Moody's Investors Service said on Monday it maintains a cautious outlook for GCC corporates in light of recent political developments in the region.
The view comes despite the recent stabilising trend observed among the Gulf Cooperation Council markets, the rating agency said in a statement.
"While Moody's believes that GCC corporate credit quality could further stabilise, the rating agency is mindful of the near-term economic impact that regional political instability could have on selected markets and issuers," said David Staples, managing director for Corporate Finance in the GCC.
Moody's said the downward ratings trend seen among GCC corporates in 2009-10 had abated, but moderate pressure is likely to continue in 2011.
"The risk of downgrades remains highest for lower-rated issuers, typically in the non-investment-grade spectrum, due to their need to refinance upcoming debt maturities and in some cases continue restructuring their real estate exposures," Staples added.
He said the stabilising trend among GCC markets was underpinned by the broader recovery currently underway, in line with Moody's macroeconomic forecast for a continued sluggish rebound among advanced economies in Europe, the Middle East and Africa (EMEA) in 2011.
"In the GCC, this trend is particularly driven by the resurgence in commodity prices, particularly in the hydrocarbon and petrochemical sectors," added Martin Kohlhase, a Moody's analyst.
Moody's said it believes that the Dubai-based government-owned companies collectively known as "Dubai Inc" remain a key area of focus given the various challenges these entities face and the options at the government's disposal for addressing their refinancing exposure.