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Dubai-based DIFC Investments 'B+/B' ratings affirmed on disposal plan |
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9 August 2010 |
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Standard and Poor's Ratings Services said today it has affirmed its 'B+/B' long- and short-term corporate credit ratings on DIFC Investments LLC (DIFCI), the infrastructure and investment arm of the Dubai-based financial free-zone DIFC. At the same time, we have removed the ratings from CreditWatch, where they had been placed with negative implications on November 25, 2009. The outlook is negative.
The affirmation reflects our view of DIFCI's $1bn plus restructuring program to dispose of its noncore assets. Although we view this as a positive step with respect to DIFCI's creditworthiness, we think it involves execution risk. We also believe that additional asset disposals are necessary in order to put the company on a self-sustainable footing. The ratings are also based on our view of DIFCI's weak earnings and operating cash flow. The company has high levels of debt--which stood at $3.1bn on December 31, 2009, when adjusted by our measurements--and noncore investments in companies and private equity funds that generate little or no dividends. The ratings also factor in a revision to our assumptions regarding the likelihood of extraordinary support from the government of the Emirate of Dubai (not rated), which owns 100% of DIFCI.
The 'B+' rating on DIFCI is based on our view of the company's stand-alone credit profile (SACP), which we assess at 'B-'. The 'B+' rating incorporates two notches of uplift to reflect our opinion that there is a "moderately high" likelihood that the Dubai government would provide timely and what we view to be sufficient extraordinary support to DIFCI in the event of financial distress.
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Source: beta.thehindu.com |
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