Moody’s downgrades Dubai Holding Commercial Operations bonds to B3


Moody’s Investors Service has today downgraded to B3 from B2 the notes issued by Dubai Holding Commercial Operations MTN Ltd. under its Medium Term Note (MTN) programme. The Probability of Default Rating (PDR) of Dubai Holding Commercial Operations Group LLC (DHCOG) was left unchanged at B3, Global Arab Network reports according to a press statement. Moody’s is maintaining its review for possible downgrade of the company’s B2 Corporate Family Rating (CFR) as well as the MTN ratings and the PDR.

Today’s rating action follows the statement by DHCOG on 30 December 2010 that it has reached an agreement with its banks for the USD555 million revolving credit facility (unrated). “Despite the limited information so far regarding the new terms, Moody’s believes that the banks may now be in a preferential position vis-a-vis bondholders,” says Martin Kohlhase, AVP-Analyst at Moody’s in Dubai. “Moody’s has accordingly reflected this by downgrading the debt instruments’ ratings to B3,” Mr. Kohlhase adds.

Moody’s is maintaining the PDR at the B3 level to indicate the continued high default risk until the capital market debt is refinanced over the next 14 months when the following MTNs mature: CHF250 million (ca. USD240 million; July 2011) and USD500 million (February 2012).

During the ongoing ratings review – which Moody’s will conclude by the end of January 2011 — the rating agency will continue to hold discussions with DHCOG’s management about the company’s outlook, the business plan and the refinancing risks. While some recent macroeconomic and trade data represent evidence of a recovery in DHCOG’s core recurring business activities, the Dubai real estate market remains hampered by overcapacities, where DHCOG plays a dominant role as one of the largest master developers.

Moody’s last rating action on DHCOG was implemented on 30 June 2010, when the rating agency downgraded the company’s senior unsecured issuer and debt ratings to B2 from B1. At the time, Moody’s also converted the ratings into a corporate family rating (CFR) and assigned a probability of default rating (PDR) of B3, in line with the rating agency’s practice for corporate issuers with non-investment-grade ratings. Moody’s also maintained DHCOG’s ratings on review for possible downgrade.

The principal methodologies used in this rating were Government-Related Issuers: Methodology Update published in July 2010, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Dubai Holding Commercial Operations Group LLC (DHCOG) is a wholly owned subsidiary of Dubai Holding LLC (DH) and incorporates all the non-financial investment businesses of the group, essentially real estate and hospitality businesses as well as free zones in Dubai.


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