Moody's confirms stable outlook for Dewa
Dubai, March 25, 2010
Moody's has confirmed the Ba2 issuer and Sukuk ratings of Dubai Electricity & Water Authority (Dewa) with a stable outlook and has taken them off review for downgrade.
This follows Dewa's recent successful negotiation of the terms of its receivables securitisation programme issued under Thor Asset Purchase Company Limited (Thor).
Dewa's ratings were lowered to Ba2 and placed on review for downgrade on December 8, 2009, both as a result of wider reductions in government support factored into the ratings of all Dubai government-related issuers (GRIs), and concerns surrounding Dewa's liquidity following the trigger of a Special Event which could have led to accelerated payment on the $2 billion securitisation.
Noteholders agreed to temporarily waive this trigger, and have since agreed to a range of longer term amendments to the documents, which have eased the liquidity pressure on Dewa.
These amendments include a partial repayment of the Notes by year-end 2010. Whilst this has a negative liquidity impact on Dewa, Moody's believes that the repayment amount can be met with sufficient headroom from Dewa's existing cash balance and ongoing cash generation, which was strong in 2009. Further amendments include a more generously defined Specific Event trigger and repayment terms spread over 12 months upon such an event being triggered. This in turn should be more supportive to the long term availability of the Thor financing, which matures in 2036.
At the same time, Moody's believes that Dewa will remain reliant on third-party funding for the foreseeable future to support its long term capital expenditure programme, which constrains its ratings. Whilst this has been scaled back from previous years in response to lower expected demand for power and water, it nonetheless remains substantial.
Accordingly, Moody's will focus on the company's ability to attract debt financing over the near term in order to fund its investments. No Dubai GRI has accessed the capital markets since the announcement of Dubai World's restructuring in November 2009.
Moody's also adds that the restructuring proposal for Dubai World, announced today (March 25) by the Dubai government, is broadly positive for lenders and bondholders, and should constitute an important step in returning Dubai to a more stable footing.-TradeArabia News Service