Dubai: Ratings agency Moody’s has upgraded the long-term issuer rating of Dubai-based port operator DP World from Baa2 to Baa1, with a stable outlook.
The agency said the upgrade reflected DP World’s diversified global operations, the expected long-term growth in international container shipping, solid profitability and liquidity, management track record in adherence to leverage targets, and its flexibility to delay capital expenditure to support its balance sheet if required.
“Our decision to upgrade DP World’s ratings reflects a strong track record in managing its business through industry cycles as well as achieving its growth ambitions, while maintaining a healthy financial profile,” said Rehan Akbar, a Moody’s vice-president and senior analyst.
- Rehan Akbar | Moody’s vice-president and senior analyst
“DP World’s growing scale and geographic footprint has increased its business resilience, which Moody’s now sees as more appropriately reflected in the Baa1 rating.”
Moody’s did not mention DP World’s successful arbitration ruling against the government of Djibouti last week over the seizure of Doraleh Container Port in a note explaining the upgrade.
But it did warn that the ongoing trade tensions between the US and its trading partners posed a downside risk, and that uncertainty surrounding a trade war would adversely affect business confidence and delay investment decisions, leading to weaker global trade in the second half of 2018.
Nevertheless, it noted that DP World does not operate any ports in the US, that its operations in Canada comprise less than 5 per cent of its capacity, and that its direct exposure to the Far East is limited.
The upgraded rating already incorporated the firm’s correlation to fluctuating trade volumes, its connection to Dubai and its significant ongoing capital expenditures, Moody’s said.
The note added, “Overall, Moody’s believes DPW’s credit metrics will remain commensurate to a Baa1 rating even after sensitising moderate weakness in DPW’s terminals that could be potentially affected by rising trade tensions.
“Moody’s also recognises that the company’s diversified operations show that while parts of its port portfolio may face more challenging operating conditions in the near future, other parts of the portfolio may be net beneficiaries of any changes to global trade flows. Moody’s base case, therefore, does not envision a more severe ‘trade war’ that results in a structural deterioration in DPW’s cash-flow generating ability.”
