Standard & Poor's Ratings Services today said it had lowered its ratings on six Dubai-based government-related entities (GREs) by one notch. The 'A+' ratings on DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone (FZE), and JAFZ Sukuk Ltd. were lowered to 'A', and the 'A-1' short-term ratings were affirmed. The 'A/A-1' ratings on Dubai Multi Commodities Centre Authority were lowered to 'A-/A-2', while the 'A+' long-term rating on Dubai Holding Commercial Operations Group LLC (DHCOG) was also lowered to 'A'. The outlook on all entities remains negative. (A separate research update for each of the entities will follow.)
Thee ratings on the GREs reflect both their individual stand-alone credit profiles and our expectation that the United Arab Emirates (UAE; unrated) federal government, backed by its largest constituent, the Emirate of Abu Dhabi (AA/Stable/A-1+), will continue to provide, as and when the need arises, financial support to the Dubai government, which owns the rated GREs.
"The downgrades primarily reflect the ongoing impact on the GREs of the deterioration in Dubai's economic fundamentals since the last quarter of 2008, as the global economic downturn continues to depress some of Dubai's key economic sectors, including trade, tourism, and commerce," Standard & Poor's credit analyst Farouk Soussa said. "Demand in the all-important real estate sector also continues to show clear signs of having abated, with indications that a sharp correction in the real estate market, and an associated contraction in development and construction, is currently underway. We expect that as a result of these factors, the economy may contract in 2009, although quantifying this contraction is made difficult given the lack of timely national accounts data."
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