DIFC Investments, the investment arm of the Dubai International Financial Centre (DIFC), will need to raise more than $900 million (Dh3.3 billion) to meet its debt maturities this year, Standard & Poor’s Ratings Services said in a statement on Wednesday.
“Due to significant delays in planned disposals, we believe DIFCI will likely require over $900 million of new debt to meet its debt maturities in 2012. We believe, however, that the government will likely support the company to ensure it meets its debt obligations on time and in full,” S&P said.
“We could revise the outlook to stable if the company is able to raise new debt to repay the sukuk and to refinance existing bank loans at reasonable cost, and if it makes good progress in the disposal of noncore assets,” it added.
S&P also raised its view of the likelihood that the Dubai government would provide timely and sufficient extraordinary support to Dubai-based DIFC Investments to "very high" from "high". But it lowered its assessment of DIFC Investments’ stand-alone credit profile to ‘ccc-‘ from ‘ccc+’ due to further delays in asset disposals and a reassessment of the likely magnitude and timing of disposal proceeds.
The negative outlook, according to S&P, reflects assessment of the high refinancing risk due to significant delays in DIFC Investments' noncore asset disposal programme, and the need to raise significant new debt to meet existing debt maturities at a time of uncertainty among banks and capital markets globally.
Standard & Poor's on Wednesday affirmed its ‘B+’ long-term and ‘B’ short-term corporate credit ratings on Dubai-based real estate and financial investments group, DIFC Investments. The outlook remains negative.
Other factors weighing on the ratings include weak cash flow from noncore investments, high execution risk in its noncore asset disposal program, and high refinancing risk.
The heavily oversupplied Dubai office market outside the free zone, combined with competition from other regional financial centers, led to rent and fee reductions in 2011, though higher occupancy rates partly compensated for this.
DIFC Investment’s credit strengths include the strong market position of DIFC and the relatively stable cash flows that it provides DIFCI as its main infrastructure provider.