Standard & Poor's Ratings Services downgraded six Dubai government-related entities, saying the likelihood of extraordinary support from the Dubai government for the entities is “low.” The downgrades leaves the sextet in junk territory. The five whose ratings were moved out of investment grade were DIFC Investments LLC, DP World Ltd., Dubai Holding Commercial Operations Group LLC, Emaar Properties PJSC and Jebel Ali Free Zone. Dubai Multi Commodities Centre Authority was already rated as junk. Meanwhile, ratings agency Moody's has said contagion effects for Abu Dhabi from the restructuring of Dubai World debt will be “unavoidable”, and the restructuring could lead to downgrades for United Arab Emirates bank ratings. “The contagion effect for Abu Dhabi will be unavoidable, as doubts will be raised as to how Dubai is going to finance its growth,” Moody's analysts said. “The form of the proposed debt restructuring could increase the likelihood of downgrades of bank financial strength ratings (BFSRs) for the (UAE) banks that are already on review.” Moody's said the potential default of quasi-sovereign Dubai World “changes long-held market assumptions regarding implicit government support of local credits”. Moody's rates the UAE and Abu Dhabi at Aa2. It does not rate Dubai. S&P believes the Dubai government doesn't view the six entities' “credit standing or financial obligations as its priority responsibilities.” “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,” S&P noted.
