x Abu Dhabi, UAEMonday 22 January 2018

TDIC fights back after Moody's ratings cut

TDIC yesterday hit back at a decision by Moody's Investors Service to cut its credit rating, saying the agency did not properly take into account its "unconditional support" from the Government.

Abu Dhabi's Tourism Development and Investment Company (TDIC) yesterday hit back at a decision by Moody's Investors Service to cut its credit rating, saying the agency did not properly take into account its "unconditional support" from the Government. "Tourism Development and Investment Company questions the ratings adjustments taken by Moody's Investors Service following their subsequent review of some entities within Abu Dhabi," the company said.

"TDIC believes the rationale underpinning such a decision to be unjustified given that the company is 100 per cent owned by the Government of Abu Dhabi and continues to receive unconditional support from them." The TDIC's downgrade came as Moody's yesterday lowered the ratings of seven government-owned companies, cutting Abu Dhabi National Energy's (Taqa) credit rating by four notches and reducing Aldar Properties's mark by two to "junk" status.

The Abu Dhabi Government expressed its support for the companies that were downgraded, singling out the TDIC, International Petroleum Investment Company (IPIC) and Mubadala Development, the Abu Dhabi Government strategic investment arm. "It is impossible to differentiate between the Government and any of these three entities in terms of credit risk," said the Undersecretary of Abu Dhabi's Department of Finance, Hamad al Hurr al Suwaidi.

The ratings reductions follow Moody's decision in December to place the seven companies on credit watch for possible downgrade following a review of assumptions about government support for companies in the UAE. Many companies across the region have had their credit ratings reduced as all three of the big ratings firms - Moody's, Standard & Poor's and Fitch Ratings - remove long-held presumptions of government support from their assessments of companies' financial health. These ratings affect the interest rates that companies must pay on borrowings, and lower ratings can make it harder to attract capital.

Six of the companies downgraded yesterday are owned by the Abu Dhabi Government, while a seventh - the telecommunications giant Etisalat - is majority-owned by the Federal Government. Etisalat, IPIC and Mubadala Development were all lowered by one notch to "Aa3", the agency's fourth-highest rating. Abu Dhabi's Dolphin Energy was downgraded by one notch to "A1", the fifth-highest rating. The largest reductions came for the TDIC, which was reduced by two notches to "A1", Aldar, which was lowered by two notches to "Ba1" and Taqa, which was lowered four notches to "A3".

Aldar's reduction to "Ba1", or the highest below-investment grade rating, will raise borrowing costs on a US$1.25 billion (Dh4.59bn) Islamic bond that is due in 2014, Majed Azzam, an analyst at HC Securities in Dubai, said in a note. Shafqat Malik, the chief financial officer at Aldar, confirmed that the company's borrowing costs would increase as a result of the downgrade, but said it would not affect Aldar's projects or future borrowing plans.

Aldar, which is behind numerous high-profile developments in Abu Dhabi, is 45 per cent owned by Abu Dhabi Government interests. It is listed on the Abu Dhabi Securities Exchange index. Dolphin Energy, a gas pipeline company, said its "business model is unaffected" by the downgrade. Taqa said its government support had not changed. Mubadala said the downgrade "does not have any financial, strategic or operational impact on [its] business model". Etisalat declined to comment, and IPIC could not be reached for comment.

afitch@thenational.ae In the original version of this story the telecommunications giant Etisalat was described as being based in Dubai. The company is based in Abu Dhabi and is majority-owned by the Federal Government. The National regrets the error.