International ratings agency Fitch could possibly downgrade Dubai Holding Commercial Operations Group’s (DHCOG) by more than one notch due to weaker credit profile amid deteriorating market conditions in the next few months.
Currently, DHCOG is on Rating Watch Negative (RWN) which Fitch Ratings aims to resolve within the next few months and could result in downgrade.
DHCOG’s Long-term Issuer Default Rating (IDR) and senior unsecured 'B+' ratings, respectively were maintained on RWN on Tuesday.
The action follows last week's statement by Mohammed Al Shaibani, the Director of the Ruler's Court, in relation to a prospective debt restructuring, in particular, the investment arm of Dubai Holding, rather than DHCOG itself.
Fitch said DHCOG's management has confirmed to it that Dubai Holding unit is ring-fenced from the reported restructuring at the investment arm. The company has also confirmed that it still has access to funds from the Dubai Financial Support Fund for drawdown, the availability of which is a contributory factor to Fitch's one-notch uplift from DHCOG's 'B' standalone rating.
“The maintenance of the ratings on RWN further reflects concern that the deterioration in market conditions has weakened DHCOG's operational performance, and will result in a weaker credit profile. The RWN also reflects short-term liquidity risk associated with debt maturities at DHCOG,” Fitch said in a statement.
Resolution of the RWN will be contingent upon the receipt and review of DHCOG's revised business plan, confirming the group's ongoing ability to generate cash flow and retain adequate liquidity. The removal from RWN will also be contingent upon DHCOG successfully refinancing its $555m RCF facility, which will contribute positively to a more manageable maturity profile over the medium term, or obtaining additional government funds to repay the facility.