Dubai’s JAFZ rating cut by Moody’s on credit squeeze

Jebel Ali Free Zone had its credit rating cut at Moody’s Investors Service, citing financial weakness at the state-owned business park’s parent company, Dubai World.

Moody’s also placed its investment grade A1 ratings on DP World Ltd., the Dubai-based port operator, DIFC Investments LLC, the company owned by state-owned Dubai International Financial Centre, and Dubai Electricity & Water Authority, the state-owned utility, under review for a possible downgrade. The rating of Jebel Ali Free Zone, also known as Jafz, was lowered by one level to A3, four steps above non-investment grade, following a July 8 downgrade to A2.

“Today’s rating actions reflect the still limited transparency on government policy and criteria toward the provision of support to government-related issuers,” the rating firm said in an e-mailed statement today.

Dubai plans to raise the second half of its $20 billion bond program to help state-controlled companies through the global credit crisis and has issued a decree setting up a company to manage the proceeds, the emirate’s Department of Finance said last month.

Dubai and its government-owned companies borrowed $80bn to finance the transformation into a regional financial and tourist hub. The global credit crisis has left companies struggling to attract investors to refinance the debt. Nakheel PJSC, the real-estate developer controlled by Dubai World, has a $3.52bn Islamic bond maturing in December.

Nakheel’s bond “maturity remains a major test of the government’s willingness to support state companies,” Moody’s said in the statement.

Moody’s didn’t change its A3 rating on Dubai Holding Commercial Operations Group and its Baa1 rating of Emaar Properties PJSC. The ratings remain on review for a possible downgrade pending the merger of Dubai Holding’s real-estate activities with Emaar, the statement said.