S&P affirms RAK rating

Standard & Poor's Ratings Services yesterday affirmed its "A" long-term and "A-1" short-term sovereign credit rating of Ras Al Khaimah (RAK) as the emirate enjoys modest liabilities.

It gave a stable outlook to the emirate with the Transfer and Convertibility assessment remains "AA+".

"The ratings on RAK, the northernmost of the seven emirates that comprise the United Arab Emirates, rest primarily on ongoing support from the federal government of the UAE and the likelihood of extraordinary support in the event of financial stress," said Standard and Poor's credit analyst Farouk Soussa.

"The ratings on RAK rest primarily on ongoing support from the federal government and the likelihood of extraordinary support in the event of financial stress," said Soussa. "The federal government, funded mostly by Abu Dhabi and underpinned by that emirate's oil wealth, meets almost all the current expenditure costs of the seven emirates that make up the UAE, while major capital costs are also borne at the federal level."

Individual emirates have limited fiscal obligations and consequently substantial fiscal flexibility.

In addition, the financial capacity of the UAE and the larger emirates, in particular Abu Dhabi, is ample to cover RAK's modest liabilities.

"Downward pressure on the rating could result from a deterioration in RAK's economic prospects beyond the decline we have projected for 2009, or a deterioration in Abu Dhabi's creditworthiness, which could affect our assessment of likely support to RAK from the federation," he said.

"A positive rating action could follow an easing of regional geopolitical tensions, the successful implementation of RAK's development strategy, particularly with regard to real estate and tourism, or an improvement in Abu Dhabi's creditworthiness,"added Soussa.

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