Dubai Holding downgraded by Fitch Ratings

Dubai Holding

New York-based international credit rating agency Fitch Ratings as downgraded Dubai Holding Commercial Operations Group's (DHCOG) ratings because of increasing doubts about the Dubai government's ability to support the group.

DHCOG's long-term issuer default rating and senior unsecured rating were both lowered from BB to B+ and remained on "Rating Watch Negative," Fitch said in a statement.

Middle East Online reported that the action reflects Fitch's changed approach to DHCOG, effectively 97.4 percent owned by Dubai's ruler Sheikh Mohammed bin Rashid al-Maktoum, which it now rates on a standalone basis rather than on a top-down parent and subsidiary basis

Key infrastrucutre projects

The group remains one of the major government-related masterplan developers in Dubai and has received huge incentives and encouragment from Dubais government to develop key infrastrucutre and property projects in the emirate, and has even been given gifted land by the government.

"This is due to a continuing lack of substantive information on the government's ability to support the group in case of need," Fitch said, adding the negative rating "reflected concerns that the deterioration in market conditions has weakened DHCOG's operational performance."

"DHCOG is exposed to cyclical industries, principally Dubai's real estate and hospitality markets which could potentially experience increased vacancy rates and a higher risk of buyer and tenant defaults," Fitch said.

"Weakness in these markets is expected to continue through 2010 and 2011 at least."

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