Moody's cuts DHCOG bonds on credit deal

Credit rating agency Moody's downgraded the bonds of Dubai Holding Commercial Operations Group (DHCOG) on Monday, citing a deal with lenders to convert a $555 million revolving credit facility into a five-year term loan.

Moody's downgraded the notes of conglomerate Dubai Holding's main unit by one notch to B3, while maintaining a review for possible downgrade of the company's B2 corporate family rating (CFR).

The rating action followed a statement by DHCOG on Dec. 30 that the company had reached a deal with lenders to convert the $555 million revolving credit facility into a five-year term loan.

DHCOG, Dubai Holding's loss-making hospitality and property arm, had extended for a third time the loan due Nov. 30, to Dec. 30.

"Despite the limited information so far regarding the new terms, Moody's believes that the banks may now be in a preferential position vis-a-vis bondholders," said Martin Kohlhase, analyst at Moody's in Dubai.

"Moody's has accordingly reflected this by downgrading the debt instruments' ratings to B3," Kohlhase said.

Moody's maintained its review for possible downgrade of the medium term note (MTN) ratings and the probability of default rating (PDR).

Moody's said it was maintaining the PDR at B3 to indicate continued high default risk until the capital market debt is refinanced over the next 14 months.

The agency said DHCOG had a $240 million MTN maturing in July 2011 and a $500 million MTN in February 2012.

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