Moody's likely to downgrade Dubai's DHCOG
Dubai, June 14, 2010
Credit rating agency Moody's is likely to downgrade Dubai Holding Commercial Operations Group (DHCOG) shortly due to spillover risks from the restructuring at its parent Dubai Holding, a Moody's analyst said.
The potential move would further compound looming problems at Dubai Holding, which spans financial investments, hospitality and real estate and is owned by the emirate's ruler Sheikh Mohammed bin Rashid Al Maktoum.
"It is likely to be downgraded, it will be sooner (rather) than later," Martin Kohlhase, assistant vice president and analyst for corporate finance at Moody's, told Reuters.
"It is also due to its exposure to Dubai real estate," he said on the sidelines of an investors' conference.
DHCOG, the conglomerate's main unit, said this month it may resort to asset sales to deal with its debt. It posted a $6.2 billion loss for 2009 after taking a big hit on its exposure to Dubai's property crash.
The loss increases the challenges for Dubai Holding to meet its debt obligations, estimated at $14.8 billion out of a total $109 billion owed by the government of Dubai and its related entities.
DHCOG is now rated B1 by Moody's. Kohlhase declined to state by how many notches it could be downgraded.
He said Moody's had strong verbal support from the Abu Dhabi government on state-linked entities. "Although there's weak liquidity as stand-alone entities, it is overcome by integrated budgeting process with the department of finance," he said. - Reuters