• Home
• /
• Local business

Emaar Downgraded to ‘BBB+’ From ‘A-’

“The rating action reflects the continued weak real estate markets in Dubai, and our increased uncertainties about the depth of the downturn and the pace of eventual recovery,” S&P said in a statement on Tuesday. S&P said its ratings on Emaar also reflected the group’s important role and strong position in the Dubai property development market and its close relationship with, and 32 per cent ownership by, the government of Dubai.

“The main constraining rating factors include the inherent risks in the cyclical property development industry and the group’s large exposure to the weakening of the Dubai real estate market.” Emaar, the Middle East’s biggest property developer has been hit hard by the downturn in the property sector which saw the frenzied growth in the last five years come to an abrupt halt when liquidity dried up resulting in tighter lending conditions for customers, and speculative investors withdrawing from the market.

S&P said this has led to most property developers, including Emaar, reviewing and postponing planned projects, which will negatively impact future cash inflows. It said risks for Emaar continue as its expansion in the Middle East and North Africa has so far offered only a limited cushion against the downturn in Dubai, and the company’s US unit, homebuilder WH Homes, recently filed for bankruptcy protection.

“Emaar’s operating cash flows and cash flow credit measures are likely to significantly weaken in the near term, although the group comes from a strong position in 2008.” S&P said its negative outlook on Emaar reflects the weakening of the real estate markets in Dubai, “which if prolonged and more severe than we currently anticipate, could put pressure on Emaar’s cash flows and financial position, and subsequently could lead to a further downgrade in the near to medium term.” Emaar shares on Tuesday slipped 1.98 per cent to Dh1.98.

rocel@khaleejtimes.com