Emaar’s credit rating downgraded

Standard & Poor’s downgraded the credit ratings of seven Dubai companies on Tuesday, including Emaar Properties, and said it was worried about the health of banks as the former boomtown faces a sharp slowdown.

Dubai’s economy could shrink between 2 and 4 percent in real terms this year, S&P said, as a collapse in oil prices and the global financial crisis take their toll on real estate prices and equities.

S&P said it had downgraded Emaar to BBB+ from A- with a negative outlook, taking the developer almost below investment grade, while it also slashed ratings of other companies, including DP World, by one notch each.

Four Dubai-based banks covered by the ratings agency were also placed on ratings watch, with negative implications, partly because S&P was concerned about the banks’ exposure to the emirate’s real estate sector.

Residential real estate prices in Dubai could slump almost 38 percent this year, a Reuters poll showed this week.

“The global economic downturn continues to depress some of Dubai’s key economic sectors, including trade, tourism, and commerce,”

S&P credit analyst Farouk Soussa said in one of three notes issued on Tuesday.

“We expect that as a result of these factors, the economy may contract in 2009.”

Emaar, one of the region’s biggest developers, was downgraded due to its heavy exposure to the weakening Dubai property market, S&P said.

“The weak markets are negatively affecting our view of Emaar’s business risk, and are likely to weaken Emaar’s currently healthy financial position in the near to medium term,”

said S&P credit analyst Alf Stenqvist.

Reuters

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