Moody’s downgraded the six Dubai GREs last week, but the S&P move looks much more severe and follows the stark declaration from the Dubai finance ministry, which the rating agency has read as saying that anyone lending to the GREs should only do so on their stand-alone credit quality.
The promise of timely government support should not be relied upon - as every investor in Dubai now knows. And it goes without saying that these latest S&P ratings remain on credit watch, with negative implications.
One interesting side-note — S&P classifies a “standstill” as a default:
…under Standard & Poor’s default criteria (see “Rating Implications of Exchange Offers and Similar Restructurings” below), a standstill is considered a default. Standard & Poor’s is of the opinion that, as evidenced in the case of Dubai World and Nakheel, the Dubai government is either unable or unwilling, or both, to provide extraordinary government support in the form of timely and sufficient financial support to those of its GREs that provide essential government services on its behalf.
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