* Downgrades debt rating to B3 from B2
* Cites govt support concerns and level of debt
DUBAI, July 8 Ratings agency Moody's lowered its
rating on Dubai's DIFC Investments and said the probability of
default was higher due to lack of government support and
concerns about Dubai's ongoing debt restructuring.
"DIFCI's downgrade reflects the group's highly leveraged
financial profile, its expected heavy reliance on asset
disposals in the coming 12-24 months ... and its continued
negative free cash flow generation," said Niel Bisset, senior
vice president at Moody's in London in a statement.
Moody's said the downgrade also reflected the "significant
impairments" in DIFCI's real estate portfolio which contributed
to its 2009 loss.
DIFC Investments is a wholly owned subsidiary of Dubai
International Financial Authority and incorporates the
commercial activities of Dubai's financial free zone, which is
called the Dubai International Financial Centre (DIFC).
DIFC, a tax free business hub, hosts most of the foreign
financial companies active in the Gulf.
It was set up by Dubai's government in 2002 in a bid to
establish a financial centre that could rival the likes of
Singapore and Frankfurt.
Dubai announced a shock standstill last year on repaying
some $26 billion in debt as it restructured flagship
conglomerate Dubai World [DBWLD.UL]. It has since unveiled a
$9.5 billion rescue plan for the unit.
Analysts say the focus of investor concerns has now shifted
to debt troubles at the matrix of government-linked entities
commonly known as Dubai Inc, though no state-linked unit has
DIFC Investments posted a $562 million loss in 2009 due to
writedowns related to the group's investment portfolio and
warned market conditions would remain volatile. [ID:nLDE6410BB]
Moody's retains a negative outlook on DIFCI ratings to
reflect the company's debt burden and its liquidity profile, it
said in the statement.
(Reporting by Rachna Uppal; Editing by Dinesh Nair and Jon