Moody's Dubai World concerns lift

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By Simeon Ker  www.ft.com

Moody’s said yesterday its concerns over possible contagion from Dubai World, the troubled conglomerate, to DP World, the port operator that Dubai World owns, had been alleviated.

The ratings agency confirmed DP World’s ratings, which were downgraded to Ba1 in December with a review for a possible further downgrade after Dubai World surprised markets by announcing its intention to restructure its debts.

Dubai World, one of the government’s biggest holding companies, last month presented its restructuring proposal on more than $24bn in debt. DP World has been so far “ringfenced” from the broader restructuring, which is focusing on the holding company and development arm Nakheel.

“The recent restructuring proposal for the parent company has shown a renewed public commitment to safeguard healthy subsidiaries of Dubai World, including DP World, from any adverse actions from the parent,” said Philipp Lotter, senior vice-president in Moody’s Corporate Finance Group.

“As a result, Moody’s believes further negative rating actions on DP World should now be contained.” The ratings agency said the company’s recent financial performance was encouraging and could result in a further ratings upgrade over time.

The announcement will come as a shot in the arm for the Dubai government, which has faced a series of ratings downgrades to state-linked companies such as Dubai World. Concern about the government’s $109bn debt mountain was fuelled by the poorly handled announcement of Dubai World’s restructuring in November.

Creditors have generally welcomed Dubai World’s restructuring proposal. The government has injected $9.5bn into the company, mainly intended to revive the fortunes of subsidiary Nakheel, the property developer, which has been hit hard by the collapse of the real estate market over the last 18 months.

Standard & Poor’s, which downgraded DP World and five other state-linked companies in December, has said it will reassess these ratings in the wake of the Dubai World restructuring proposal.

DP World is considering a secondary listing on the London Stock Exchange in the second quarter as it seeks to attract liquidity to its stock, which it feels has underperformed on the Nasdaq Dubai exchange.

While profits fell 46 per cent last year, the company reported signs of improvement in the first two months of this year.

Moody’s said it expected “this trend to continue as the global recovery in trade volumes gains momentum”.


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