Abu Dhabi firms removed from credit watch list

Dubai: Global credit rating agency Standard & Poor's announced yesterday that it has removed three leading Abu Dhabi Government related entities (GREs) from its credit watch list.

"Following a reassessment of our view on the support of the government of the Emirate of Abu Dhabi for International Petroleum Investment Company, Mubadala Development Company, and Tourism Development and Investment Company (TDIC), we affirm their long- and short-term ratings ‘AA' and ‘A-1+', respectively," S&P said in a statement.

The three Abu Dhabi GREs are the biggest UAE-based debt issuers in the international credit market.

These firms were put on credit watch by S&P on April 7, 2010. The rating agency said that it expects extraordinary support for these GREs from the government in the event of financial distress.

"In accordance with our criteria on government-related entities (GREs), the ratings on the three institutions are equalised with those on the sovereign, based on our assessment of the ‘critical' role they play for the government and their integral links with the government," S&P said.

S&P rates IPIC, Mubadala, and TDIC according to its enhanced criteria on GREs.

Although the government does not formally guarantee the GREs' liabilities, the agency has equalised the ratings on the three entities with those on the government of Abu Dhabi.

"This assessment is based on what we believe is the companies' critical role for Abu Dhabi's official long-term development and economic diversification strategies and an integral link with the government.

"Accordingly, we consider that extraordinary government support in times of financial stress is almost certain," Moritz Kraemer, Frankfurt, primary credit analyst with S&P said in a statement.

In its review assessment, S&P observed that the government has sole ownership of these three companies and it expects that the ownership structure will remain unchanged over the long term.

The government directly controls all important operational and financial transactions of the three entities through its dominance of the board of directors.

The rating agency also observed that these companies' operational proximity to the Abu Dhabi government and the government's capacity and willingness to intervene in the event of any financial difficulties.