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Mon 27 Aug 2007 04:42 PM

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Moody's, S&P maintain Emaar rating

Agencies will not downgrade developer, despite cancellation of land-for-shares deal.

The credit rating of UAE developer Emaar Properties will not be downgraded following the decision to abandon the land-for-shares deal that had been agreed with Dubai Holding, two ratings agencies announced today.

Emaar retains its 'A3' issuer rating from Moody’s Investors Service, adding that the rating outlook remains stable.

Moody's said the proposed creation of joint venture companies between Dubai Holding and Emaar, instead of the land-for-shares deal, should support the company's domestic position as one of the primary masterplan property developers in Dubai.

“We believe that the government support that would be provided to Emaar, if needed, is just as high at its current ownership stake of 32% as it would be at over 50%," said Philipp Lotter, senior credit officer at Moody’s and lead analyst for Emaar.

“However, we expect the government to maintain its current stake in the company, which is the minimum expected for the current support assumptions factored into the rating.”

Ratings agency Standard & Poor’s also maintains its 'A-' rating on Emaar, despite previously saying its opinion on Emaar’s credit rating would need to be reassessed if the land-for-shares deal fell through.

“Although the land-for-shares deal would probably have been beneficial for Emaar's credit quality, the key credit strengths supporting the rating on the company are expected to remain unchanged,” Standard & Poor’s said in a statement.

Emaar Properties announced it had ended an attempt to acquire government land in Dubai in exchange for stock on August 25.

The largest Arab property developer by market value had said it planned to pay for the land by giving Dubai Holding, the investment arm of Dubai government, about $8 billion worth of stock. However, the firm never revealed key details about the size, location or value of the land.

Following the announcement, shares in Emaar made their biggest one-day gain in more than 15 months as the cancellation removed uneasiness that had been weighing on the stock.

Emaar’s stock price rallied 6.8% on Dubai Financial Market (DFM) to finish at 11 dirhams ($3) on August 26, its biggest single-day rise since May 18 last year.

The share price had sank to a 28-month low of 9.75 dirhams last week as investors dumped the stock over uncertainty surrounding the deal.

Prior to a 5.64% rally in Emaar shares on August 23, the stock had tumbled 17.4% from March 19, when the swap deal was announced.