S&P tailors credit ratings for Gulf

Standard and Poor's (S&P) yesterday launched a regional credit-ratings system through which companies in the Gulf will be judged against each other, instead of against their global peers. The introduction of the GCC ratings system comes as S&P and other credit ratings agencies face a challenging business environment with disputes over changing assumptions of government support.

In recent months, S&P was dropped by Emirates NBD, the UAE's largest bank, while the agency decided to stop rating a division of the government-owned Dubai Holding, saying it was not provided with enough financial information. "The criteria used by S&P to analyse business and financial risk are the same for both the regional and global rating scales," said Rob Richards, a managing director at S&P. "However, while global scale ratings are assigned based on a comparison of credit risk among issuers and issuances located all over the world, the GCC regional scale will focus on comparing credit risk relative to Gulf issuers and issuances only."

The new system echoes a similar regional ratings scale in Asia that S&P launched last summer. About 65 companies have signed up for the Asian ratings, said Jan Plantagie, the Middle East regional manager for S&P. "S&P started developing the GCC regional scale in early 2008, when local currency debt issuance was quite high," Mr Plantagie said. "Although local debt issuance peaked in 2006-2008, we expect a resurgence in local currency issuance over the coming years, driven by large financing needs for infrastructure development, stronger competition for funds in the GCC, and government initiatives to stimulate local bond markets."

Officials at S&P said the regional ratings will generally be higher than their ratings on a global scale. The regional ratings will be on the same scale that S&P uses globally. @Email:afitch@thenational.ae