Mubadala rating move augurs well for business in region


We could be witnessing a growing trend in Gulf business. News that Mubadala, the Abu Dhabi investment group that is renowned for its rigid sense of privacy, is seeking a rating with the world's big credit agencies could open the door for a host of other state-owned funds to do the same. Mubadala has stakes in Italian car manufacturer Ferrari and the giant US investment organisation Carlyle, but has never revealed the size of its financial assets, which have been estimated at anything from $10billion (Dh36.7bn) upwards.

If it gets its credit approval it will probably have to be more open with regard to transparency, which is a good thing. It will also find that a decent rating – and it seems impossible that any agency will come up with anything less than top-notch for an organisation with Mubadala's pedigree – will give it access to low-cost debt, a real benefit in a time of global financial uncertainty.

With a policy of interest rate cuts firmly in place in the US and Europe, money is cheap. It makes a great deal of sense for Mubadala, and other UAE groups, to borrow the cash they will use to fund their global expansion. The inflationary outlook makes the case for such a policy particularly compelling.

However, I have to take issue with reports that the Abu Dhabi group would be "the first state-owned investment entity in the Middle East to receive a rating". Over a year ago, Dubai Holding Commercial Operations, the investment business owned by the Government of Dubai via Dubai Holdings, sought and obtained excellent ratings from the "big three" agencies – Standard & Poor's, Moody's and Fitch. All gave variations of their top 'A' grade to DHCO. Other Dubai state-owned groups are also in the process of getting vetted by the agencies.

Mubadala's move has confirmed this trend, which is a positive development for business in the region.