Moody's downgrades DHCOG's bonds to B3
Dubai, January 3, 2011
Moody's Investors Service has downgraded the notes issued by Dubai Holding Commercial Operations Group (DHCOG) under its Medium Term Note (MTN) programme, to B3 from B2.
The Probability of Default Rating (PDR) of DHCOG was left unchanged at B3.
Moody's is maintaining its review for possible downgrade of the company's B2 Corporate Family Rating (CFR) as well as the MTN ratings and the PDR.
This rating action follows the statement by DHCOG on December 30, that it has reached an agreement with its banks for the $555 million revolving credit facility (unrated).
'Despite the limited information so far regarding the new terms, Moody's believes that the banks may now be in a preferential position vis-a-vis bondholders,' stated Martin Kohlhase, AVP-analyst at Moody's in Dubai.
'Moody's has accordingly reflected this by downgrading the debt instruments' ratings to B3,' he added.
Moody's is maintaining the PDR at the B3 level to indicate the continued high default risk until the capital market debt is refinanced over the next 14 months when the following MTNs mature: CHF250 million ($240 million; July 2011) and $500 million (February 2012).
During the ongoing ratings review - which Moody's will conclude by the end of January 2011 - the rating agency will continue to hold discussions with DHCOG's management about the company's outlook, the business plan and the refinancing risks. While some recent macroeconomic and trade data represent evidence of a recovery in DHCOG's core recurring business activities, the Dubai real estate market remains hampered by overcapacities, where DHCOG plays a dominant role as one of the largest master developers. he said.
Moody's last rating action on DHCOG was implemented on June 30, 2010, when the rating agency downgraded the company's senior unsecured issuer and debt ratings to B2 from B1.
At the time, Moody's also converted the ratings into a corporate family rating (CFR) and assigned a probability of default rating (PDR) of B3, in line with the rating agency's practice for corporate issuers with non-investment-grade ratings. Moody's also maintained DHCOG's ratings on review for possible downgrade.-TradeArabia News Service