Thursday 12 February 2009

Dubai Firms Face Moody’s Cut If Abu Dhabi Acts Alone

Feb. 12 (Bloomberg) -- Moody’s Investors Service may downgrade banks and government-owned companies in Dubai, the second-largest sheikhdom in the United Arab Emirates, if oil-rich Abu Dhabi limits its support to its own institutions.

“If a trend of selective treatment within the federation becomes discernible, Moody’s stands ready to reduce its high support assumptions for banks and government-owned companies in other emirates outside Abu Dhabi,” Philipp Lotter, the Dubai- based analyst at Moody’s, said in a report on the region’s credit outlook released today.

Abu Dhabi, which holds almost all of the U.A.E.’s oil, said Feb. 4 it would pump $4.4 billion into five local banks. The next day, the cost of protecting against losses on debt sold by Dubai companies jumped to a record on concern that Abu Dhabi may not rescue Dubai firms that are struggling to refinance debt maturing this year. Dubai’s debt is estimated at 90 percent of its gross domestic product, according to the International Monetary Fund.

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