Aldar Properties fell to its lowest point in three months after Moody's Investors Services cut its ratings by two notches and said it was no longer classifying the company as a government-related issuer.
The developer, based in Abu Dhabi, was downgraded to "B2" from "Ba3" and the outlook changed to "negative", the agency said.
Moody's also downgraded Aldar's US$1.25 billion bond, due in 2014, by two notches to "B3" from "B1" as well as its Dh3.75bn sukuk, due in 2013, by the same amount.
Aldar declined 3.7 per cent to Dh1.29 on the Abu Dhabi Securities Exchange. Shares declined as much as 5.1 per cent on intraday trading.
"While Moody's believes that the extraordinary support extended to Aldar recently by the Government of Abu Dhabi and Mubadala [Development] has alleviated short-term refinancing challenges, today's rating decision was prompted by the view that further extraordinary government support over the medium to long term is less certain in light of statements by the Government of Abu Dhabi in January of this year in which it reiterated its position that it views Aldar as a private company," said Martin Kohlhase, the lead analyst for Aldar at Moody's.
Mubadala, a strategic investment company owned by the Abu Dhabi Government, is set to become Aldar's largest equity shareholder, with a stake of about 49 per cent, following the conversion of a mandatory convertible bond maturing in December.
Mubadala is expected to play a more active role following the election of three of its senior managers to Aldar's board.
"Today's downgrade is the result of Moody's decision to de-classify Aldar as a government-related issuer and to instead assess Aldar's rating on a standalone basis," Mr Kohlhase said.
Aldar returned to profit in the first quarter of this year, ending a five-quarter losing streak.
