Dubai Entities to Remain Unaffected by Dubai World, Nakheel Restructuring

Fitch Ratings has reiterated that developments surrounding state support for Dubai-based entities following Dubai World’s and Nakheel’s proposed restructuring announcement of their liabilities, do not impact the agency’s assessment on sovereign support, or expectations of support, when assigning corporate bond ratings for state-owned enterprises (SOE) in GCC countries.

“Ratings have been impacted when Fitch assessed that either the willingness or the ability of the sovereign to provide support have been impaired,” said Bashar Al Natoor, director in Fitch’s industrial team. “However, when this is not the case, ratings have been affirmed at the previous level as per Fitch’s Parent-Subsidiary Linkage methodology, which remains unchanged.”

Fitch notes that the Government of Dubai support is ultimately intended to serve the future growth of the Emirate of Dubai and the wider UAE economy. However, today’s statement reiterated that “loans to GREs – unless specifically guaranteed by the government – are based on the credit risk of individual GREs”. Moreover, of the approximately US$9bn in new funding that would be made available to Dubai World and Nakheel, only about US$4bn will come from Dubai’s internal resources, split over the next three years. This suggests that Dubai’s direct ability to provide additional support remains relatively limited.


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