Following the fears of the creditworthiness of Dubai World, global rating agency Standard & Poor's Ratings Services today put on negative watch list six Dubai-government owned enterprises, owned by Dubai World and lowered ratings on four of the country's top banks.
The affected banks and entities include Emirates Bank International, National Bank of Dubai, Mashreqbank, Dubai Islamic Bank and DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone, Dubai Multi Commodities Centre Authority, Dubai Holding Commercial Operations Group LLC, and Emaar Properties PJSC.
S&P said that it had lowered its long-term counterparty credit ratings on Emirates Bank International PJSC (EBI), National Bank of Dubai (NBD), and Mashreqbank (Mashreq) to 'BBB' from 'A-', while affirming their short-term counterparty credit ratings at 'A-2'. At the same time, it lowered its long- and short-term counterparty credit ratings on Dubai Islamic Bank (DIB) to 'BBB-/A-3' from 'BBB+/A-2'.
The long- and short-term ratings on these four banks remain on CreditWatch with negative implications. Emirates NBD PJSC (not rated) recently merged the assets and liabilities of EBI and NBD.
"The rating actions reflect our decision to lower our assessments of the banks' respective stand-alone credit profiles (SACPs) because of their high exposure to Dubai-based government-related entities (GREs), which we downgraded earlier today," said Standard & Poor's credit analyst Emmanuel Volland.
S&P now considers the likelihood of extraordinary support from the Dubai government as "low" for the corporate six entities (DIFC Investments LLC, DP World Ltd., Jebel Ali Free Zone, Dubai Multi Commodities Centre Authority, Dubai Holding Commercial Operations Group LLC, and Emaar Properties PJSC) since Dubai World (including Nakheel) announced it will seek a six-month standstill on its financings.