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Wed 5 Feb 2014 08:15 PM

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S&P upgrades Emaar credit rating as Dubai booms

Real estate giant regains investment-grade rating from S&P after being downgraded in 2009

S&P upgrades Emaar credit rating as Dubai booms

Dubai's largest real estate developer Emaar Properties has regained an investment-grade credit rating, marking the emirate's strong recovery from its financial crisis five years ago.

Standard and Poor's raised its long-term rating of Emaar to BBB-minus, the lowest investment grade, from BB-plus.

In 2009, S&P had cut the state-linked firm to junk status as the global credit crunch and a crash of Dubai's property market ravaged balance sheets in the emirate.

The market is now recovering strongly, with home prices up some 20 percent last year, allowing Emaar to resume launching ambitious projects. Its retail and hotel assets are also allowing it to benefit as Dubai's trade and tourism industries prosper.

"The rating action reflects the sound performance of Emaar's high-quality, Dubai-based leasing and hospitality assets, which constitute a large share of total earnings," S&P said.

"The upgrade also incorporates Emaar's successful launch and presale of new high-margin developments in Dubai."

It added that the recent conversion of $498m of convertible Emaar notes into equity had resulted in a sizeable reduction in the company's financial leverage.

Emaar, builder of the world's tallest skyscraper, the Burj Khalifa, is 31 percent owned by the Dubai government. Since the government has not sought a credit rating, Emaar is seen as an indicator of investor confidence in the emirate.

The company's share price plunged from a peak of nearly AED29 in late 2005 to a low of AED1.7 in 2009, and is now at AED7.93.

Emaar is expected in coming days to report a 22 percent year-on-year rise in fourth-quarter net profit to AED622m ($169m), according to the median forecast of analysts polled by Reuters.

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