Moody's Investors Service commented today that the A3 issuer ratings of Emaar Properties (Emaar) remained unchanged following the company's announcement that it had called off a proposed transaction with Dubai Holding that would have provided it with land in exchange for a greater indirect government stake. The rating outlook remains stable.
"We believe that the government support that would be provided to Emaar, if needed, is just as high at its current ownership stake of 32% as it would be at over 50%", says Philipp Lotter, a Dubai/DIFC based Senior Credit Officer at Moody's and lead analyst for Emaar. "However, we expect the government to maintain its current stake in the company, which is the minimum expected for the current support assumptions factored into the rating", Lotter adds.
Moody's adds that the proposed creation of joint venture companies between Dubai Holding and Emaar should support the company's domestic position as one of the primary masterplan property developers in Dubai, thus fulfilling an important strategic mission of developing the Emirate.
Moody's awaits further information on these developments, and any potential additional financing that Emaar may need to commit to them.
However, ratings should remain stable provided that the group's capital structure remains commensurate with the company's debt-to-capital target of 30% (2006: 11.6% unadjusted, 19.3% adjusted). Given the importance of the joint ventures to the company, any debt raised at the joint venture level would be proportionally consolidated into Moody's financial ratios, even if it were to be raised on a non-recourse basis.
"The new agreement should allow Emaar to benefit from additional Dubai land, whilst eliminating much of the uncertainty of recent months", says Lotter. "Emaar's lower government stake should not alter the fact that it remains closely associated with the government's strategy for Dubai, and that it would benefit from likely support from the government, if required", Lotter adds.
Based in Dubai, United Arab Emirates (UAE), Emaar Properties PJSC ranks as the largest developer of condominiums and villas in Dubai with an estimated market share of around 22%. The company's main shareholder is the government of Dubai, with a 32% stake. In 2006, Emaar generated revenues of USD3.8 billion.
