S&P: Thor Asset Purchase (Cayman) Ltd. Notes Lowered To 'BB+' On Accelerated Payment Of Principal

Published December 8th, 2009 - 03:40 GMT

Thor Asset Purchase (Cayman) Ltd. Notes Lowered To 'BB+' On Accelerated Payment Of Principal On Dec. 14, 2009

FRANKFURT, Dec. 3, 2009--Standard & Poor's Ratings Services today said it has lowered to 'BB+' from 'A-' its issue rating on the $2 billion senior secured callable floating-rate notes issued under Thor Asset Purchase (Cayman) Ltd.'s (Thor) $4 billion medium-term note program. At the same time, Standard & Poor's changed the CreditWatch implications on the rating to developing from negative, where it had originally been placed on Nov. 25, 2009.

The Thor notes are recourse to Dubai Electricity and Water Company (DEWA; not
rated) and benefit from an unconditional guarantee from the Emirate of Dubai (not rated).
The rating actions reflect our understanding that a rating trigger--stipulated in the notes documentation--leads to an acceleration on Dec. 14, 2009, and the uncertainty surrounding the Dubai government's willingness to honor its note guarantee under the acceleration. Also, in our view, the noteholders might have incentives to waive acceleration. Such waiver is not foreseen in the
current notes documentation and, if it occurs, could consequently be considered a "distressed exchange" and thus a default under our criteria (see "Rating Implications Of Exchange Offers And Similar Restructuring, Update," in Related Research below).

The uncertainty about the Dubai government's willingness to honor its note guarantee follows the Nov. 25, 2009, announcement by Dubai World (not rated) of the six-month standstill agreement on its debt obligations and those of its subsidiary Nakheel.

The notes were originally issued in two tranches of $1 billion each on Aug. 16, 2007, and May 6, 2008. Thor loaned the note proceeds to DEWA for its general corporate purposes. Debt service on the notes is sourced from DEWA's electricity and water receivables collections. Under the note documentation, DEWA also is obliged to provide note liquidity in the event that receivables
collections are insufficient to service the notes timely. We understand that the Dubai government's guarantee is, by its terms, irrevocable. The developing CreditWatch means that the rating on the notes may be lowered, raised, or affirmed.

We could lower the rating on the notes--potentially by several notches--if we are unable to confirm the Dubai government's willingness to honor its note guarantee under the Dec. 14, 2009, acceleration. The CreditWatch also reflects the possibility that the noteholders might have incentives to waive acceleration, which could be a default under our criteria. Conversely, we could raise the ratings if the Dubai government affirms its commitment to honor its note guarantee and we examine any waiver, if it occurs, to determine that it is not tantamount to default under our criteria.
We expect to resolve the CreditWatch in the next few days.


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