Tuesday Dubai doom and gloom

Posted by Tracy Alloway on Dec 08 12:00.

Dubai doom and gloom comes in the form of two things on Tuesday morning.
First — a mass Downgrade of Dubai Inc. companies by Moody’s, the text of which is below:
Moody’s announces further downgrades to Dubai Inc. corporatesDIFC, December 08, 2009 — Moody’s Investors Service today downgraded all six Dubai government-related issuers (GRIs). This rating action follows recent comments and statements from government officials, which cause us to believe that no meaningful government support should be assumed forany entity that is not directly part of or formally guaranteed by thegovernment. As a result, Moody’s has reduced the government supportassumptions for all six issuers. All ratings now reflect the respectivecompany’s stand-alone credit profile (baseline credit assessment) withthe exception of Dubai Electricity & Water Authority (DEWA) and DIFCInvestments, whose revised ratings include one notch uplift forgovernment support recognising their stronger strategic linkage toDubai’s core economic development policies.Moody’s has also downgraded various baseline credit assessments toreflect (1) increased liquidity challenges in a tougher financingenvironment that we expect will continue for a protracted period, and (2)the longer term implications thereof on Dubai’s economy.Ratings affected by today’s rating actions include the following:- DP World issuer and debt ratings were downgraded to Ba1 from Baa2;- Dubai Electricity & Water Authority (DEWA) issuer and debt ratings weredowngraded to Ba2 from Baa2;- Jebel Ali Free Zone (JAFZ) issuer and debt ratings were downgraded toB1 from Ba1;- Dubai Holding Commercial Operations Group (DHCOG) issuer and debtratings were downgraded to B1 from Ba2;- Emaar Properties issuer ratings were downgraded to B1 from Ba2;- DIFC Investments (DIFCI) issuer and debt ratings were downgraded to B2from Ba1.All ratings remain on review for further downgrade.Since the announcement by the Dubai government on November 25 that it would restructure the debt of Dubai World and request a standstill onfinancings of some of its liabilities, the government has further clarified its position towards GRI obligations. In recent statements the government has highlighted that it sees no legal obligation to support non-guaranteed debt of its GRI’s. GRI’s that are able to demonstrate aviable business model and an ability to service their debt obligations over the long-term remain eligible for support from the government’sFinancial Support Fund. Taking into account the government’s most recent position, Moody’s no longer believes it appropriate to assume timelysupport that results in any uplift for the ratings of four of the GRIs.We view the probability of support for DEWA and DIFC as being diminishedbut sufficient to lift these ratings by one notch . . .
The second dose comes courtesy of Bloomberg, which reports that Nakheel managed to jump from a 2.65bn-dirham profit in the first half of 2008, to a staggering 13.4bn-dirham loss in the first-half of 2009.
From the newswire:Dec. 8 (Bloomberg) — Nakheel PJSC, the Dubai World-owned property developer seeking to renegotiate debt, had a first-half loss of 13.4 billion dirhams ($3.65 billion) as revenue fell and it wrote down the value of land and property, according to a document obtained by Bloomberg News.The loss for the company, which is building palm tree-shaped islands off the emirate’s coast, compared with a year-earlier profit of 2.65 billion dirhams, according to itsfinancial statement for the six months to June. Revenue fell 78 percent to 1.97 billion dirhams. A spokesman for Dubai World,Nakheel’s parent, declined to comment.
Ouch.
Emerging markets — and European banks — are currently (pretty much) down across the board.

Related link:
Dubai World restructuring to take months - FT