Dubai companies given 'junk status'

International rating agency slashes many Dubai banks and companies to junk status.

    S&P also lowered ratings on four Dubai-based banks because of large exposures to Dubai companies [AFP]

    Credit ratings for the six companies and four banks remain under surveillance and could be downgraded further, the agency said.

    Affected banks

    The four banks affected at Emirates Bank International PJSC (EBI), National Bank of Dubai (NBD), Mashreqbank (Mashreq) and Dubai Islamic Bank (DIB).

    The assets and liabilities of EBI and NBD were recently merged, S&P noted.

    Emmanuel Volland. Standard & Poor's credit analyst, said: "The rating actions reflect our decision to lower our assessments of the banks' respective stand-alone credit profiles because of their high exposure to Dubai-based GREs, which we downgraded earlier today."

    S&P said it does not rate Dubai World or Nakheel, its property arm hammered in the global economic and financial crises.

    Market concern

    The Dubai government rocked global financial markets by announcing a week ago that state-controlled Dubai World was seeking a six-month standstill on credit payments.

    Investors subsequently were alarmed when the head of the Dubai finance department said the government never intended to guarantee Dubai World's $59 billion in debt, the lion's share of the city state's borrowings estimated at up to $100 billion.

    S&P said the decision to downgrade the six companies was "reinforced by the Dubai government's recent comments stating its belief that Dubai World 'should receive financing based on the viability of its projects, not on government guarantees.'"

    S&P noted that under its criteria, "a standstill is considered a default."

    "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," it said.

    SOURCE: Agencies


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