S&P downgrades Emaar

18 March 2009

Ratings agency Standard & Poor's (S&P) has downgraded Emaar's long-term corporate credit rating to BBB+ from A-. BBB is a medium credit rating, and the lowest score a company can be given and still deemed to be ‘investment grade'.

S&P said the downgrade of the Dubai, UAE-based company reflected weaknesses in the local real estate market and uncertainties about the depth and duration of the downturn. However, it went on to say that with Dubai's government owning 32% of the company, Emaar's rating is higher than it would be as a stand-alone company thanks to this implicit support.

S&P added in a statement, "The ratings also reflect the group's current healthy financial position, low debt leverage and strong asset base. 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 is likely to find it more difficult to raise cash as a result of the downgrade, and will have to pay higher interest rates than previously on new debt.

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