DEWA downgraded by Fitch Ratings

Fitch Ratings placed the state-owned Dubai Electricity and Water Authority (DEWA) on rating watch negative due to uncertainty over payment of a substantial portion of privately held debt, the agency said. The action comes just days after Fitch downgraded the long-term issuer default rating of DEWA from "minus A" to "minus BBB" because of a weakening of Fitch's assessment of Dubai emirate.

"The rating action reflects uncertainty related to the impact of a potential near-term amortisation of a substantial portion of privately held debt," Fitch said yesterday. A string of companies related to the Dubai Government have been downgraded after the announcement last week of a restructuring of Dubai World, including a requested delay on debt owed by Dubai World and its subsidiary Nakheel. Fitch said it had also placed DEWA's short-term default rating of "F3" on rating watch negative and its Dh3.2 billion (US$871.2 million) sukuk, maturing in 2013, which is rated "minus BBB".

It said it would closely monitor discussions that DEWA was holding with funding providers, any efforts to access additional sources of liquidity, and the effect of any instalment payment of its near-term debt on its access to customer receivables. Additional liquidity to cover the debt payments could be stand-alone funding arranged by DEWA, or financial support from the Dubai Government, Fitch said.

DEWA's total debt includes Dh7.3bn in long-term funding and the Dh3.2bn sukuk, issued in June. "DEWA's ratings could be downgraded by multiple notches if it does not successfully resolve the potential upcoming amortisation obligation without jeopardising senior unsecured debt holders," Fitch said. Moody's last week downgraded six government-related entities, including DEWA, which was downgraded to "Baa2" from "A3", and left them on review for possible further downgrade.

Standard & Poor's Ratings Services lowered its issuer credit rating on DIFC Investments by four notches to "minus BBB", or one notch above junk status. It reduced its rating on DP World and Jebel Ali Free Zone by two notches to "minus BBB" and lowered Dubai Holding Commercial Operations by two notches to "minus BBB". It also lowered Emaar Properties by two notches to "minus BBB". @Email:tarnold@thenational.ae