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Thu 25 Mar 2010 04:39 PM

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S&P's to review status of five Dubai gov't firms

Ratings agency had downgraded six Dubai government-related companies in December.

S&P's to review status of five Dubai gov't firms
DUBAI DEBTS: Dubai World requested a standstill on debts in November.(Getty Images)

Standard & Poor's will reassess the credit ratings status of five Dubai government-linked firms following an "extremely positive" debt proposal for the emirate's flagship Dubai World conglomerate. The ratings agency downgraded six Dubai government-related companies in December shortly after Dubai World said it needed to delay repayment on about $26 billion of debts. S&P had warned it might downgrade the companies again.

Dubai's government said on Thursday it would inject $9.5 billion and recapitalise debt-laden Dubai World and fully repay bonds for its Nakheel property unit when they fell due.

"It is extremely positive news," Farouk Soussa, head of Middle East government ratings at S&P, told Reuters.

"We will be looking to resolve credit watch we have on the ratings in the coming weeks, and this will obviously be an important piece of information that we will be taking into account. Implications for the rating are too early to tell," he said.

In December, S&P cut ratings on DIFC Investments, DP World, Jebel Ali Free Zone, Dubai Multi Commodities Centre Authority (DMCC), Dubai Holding Commercial Operations Group (DHCOG) and Emaar Properties. It withdrew the DHCOG rating in January.

An official at Moody's ratings agency said Dubai's plan was "a positive first step" in addressing the uncertainty surrounding the debt restructuring.

"Resolving such uncertainties would be positive for the banking system and ultimately the broader UAE (United Arab Emirates) economy," said Khalid Howladar, senior credit officer at Moody's. "This (equity strengthening) is an important gesture from the government of Dubai. What they are effectively saying is that in the worst case scenario, you (creditors) will be paid back before we will," S&P's Soussa said, adding the full Nakheel bond repayment was "a positive surprise".

Dubai World requested a standstill on debts in November. The debts were related mainly to its property units Nakheel and Limitless World, which were hit hard when Dubai's booming property market crashed during the global financial crisis. Its new proposal still needs to be cleared by creditors.

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