The cost of insuring Dubai sovereign debt against default rose on the news.
Indeed, the country's credit-default swap spreads -- a key measure of credit risk -- stood at around 540 basis points late in northern hemisphere trading, which is nearly 40 basis points wider on the day.
Moody's downgraded its issuer ratings for DP World, Dubai Electricity & Water Authority, Jebel Ali Free Zone, Dubai Holding Commercial Operations Group, Emaar Properties and DIFC Investments. All remain on review for further downgrade, the agency said in an emailed statement.
"This rating action follows recent comments and statements from government officials, which cause us to believe that no meaningful government support should be assumed for any entity that is not directly part of or formally guaranteed by the government," said Philipp Lotter, senior vice-president for Gulf corporates at Moody's in Dubai.
The downgrades come after the Dubai government announced last week that it will seek a six-month payment freeze on debts of one of its biggest conglomerates Dubai World, which owns real-estate developer Nakheel.
The company is estimated to have liabilities close to $US60 billion ($66bn), of which $US26bn is debt.
The Dubai government has since said it wouldn't guarantee the debts of Dubai World.
Moody's said it also downgraded various baseline credit assessments to reflect "increased liquidity challenges in a tougher financing environment that we expect will continue for a protracted period", and "the longer term implications thereof on Dubai's economy".
It also reduced the government support assumptions for all six issuers, Moody's said.
"All ratings now reflect the respective company's stand-alone credit profile with the exception of Dubai Electricity and Water Authority and DIFC Investments," Moody's said.
These ratings include one notch uplift for government support recognizing their stronger strategic linkage to Dubai's core economic development policies, it said.
Posts
