Dubai Holding Commercial Operations Group LLC, a real-estate and hospitality group owned by Dubai’s ruler, had its long-term credit rating cut one level by Fitch Ratings as the emirate’s property industry slumped further.
The company’s long-term issuer default rating was reduced to B, the fifth-highest non-investment grade, from B+, Fitch said in a statement today. The rating was removed from rating watch negative and assigned a negative outlook, Fitch said.
“Fitch expects that the market prospects have deteriorated further,” especially for Dubai Properties Group operations, the agency said. The negative outlook reflects the risks Dubai Holding Commercial faces as it needs to repay a 250 million Swiss-franc bond in July and a $500 million bond in February 2012 while its ability to refinance debt externally is limited, Fitch said.
Real estate prices in Dubai, the Persian Gulf business hub, have declined 62 percent from their peak in mid-2008 after the global credit crisis caused mortgage lending to dry up, Deutsche Bank AG said in a report Feb. 14.
All of Dubai Holding Commercial’s assets are likely to see declining revenue over at least the next three years, with Dubai Properties Group the most affected and hospitality affected to a lesser degree, Fitch said.
Dubai Holding Commercial owns Dubai Properties Group LLC, a developer in the emirate, business park operator TECOM Investments LLC and hotel chain Jumeirah Group LLC. The company’s long-term issuer default rating is one level higher than its standalone rating due to the prospect of support from Dubai’s government in case of “ultimate need,” Fitch said.
To contact the reporters on this story: Arif Sharif in Dubai at [email protected]
To contact the editor responsible for this story: Edward Evans at [email protected]