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Rating Action:

Moody's confirms DHCOG's B2 CFR, B3 MTN ratings; outlook negative

15 Feb 2011

Approximately USD 2.14bn of rated debt instruments affected

DIFC - Dubai, February 15, 2011 -- Moody's Investors Service today confirmed the B2 Corporate Family Rating (CFR) for Dubai Holding Commercial Operations Group LLC (DHCOG), the B3 Probability of Default Rating (PDR) and the B3 ratings for multi-currency debt instruments issued by Dubai Holding Commercial Operations MTN Ltd. The outlook is negative. Today's rating action concludes Moody's rating review.

RATINGS RATIONALE

"Moody's believes that there is value in DHCOG's solid asset base from recurring revenues stemming largely from Jumeirah and TECOM, but also from DPG's rental income," explained Martin Kohlhase, a Dubai-based Moody's Assistant Vice President and lead analyst for DHCOG. "In addition, DHCOG's is moderately leveraged which is supportive of the B2 Corporate Family Rating. The group's core assets -- hospitality, free zones and the properties' rental portfolio - have performed well throughout the downturn and remain at the heart of the economy. One of our focus areas remains the winding down of the Dubai real estate exposure by collecting down payments, managing contractors' payables and deliveries which continues to represent the most pressing operational risk factor," said Mr. Kohlhase.

In Moody's opinion DHCOG has a range of non-core asset disposal options at hand, although the company has no intentions to execute any of those. The potential disposals relate mainly to its telecom assets. Among the three largest are its 19.5% stake in du (market value at ca. AED 2.8bn), Axiom and Tunisie Telecom which had a carrying value of ca. AED 7bn when last valued at FYE 2009 (this compares to an estimated year-end 2010 group debt of ca. AED 14bn per year end 2010). A degree of uncertainty regarding the execution on possible disposal options remains. There is therefore scope for the liquidity and refinancing pressure to subside quickly if these disposal options were used.

Irrespective of the solid asset debt coverage and the recurring income base Moody's has changed the outlook to negative in order to reflect our refinancing risk assessment with regards to DHCOG's July 2011 CHF 250m (ca. USD 240m) and its February 2012 USD 500m maturities, although the company has publicly stated that it would be meeting these obligations. The outlook could be stabilised when DHCOG meets its financial obligations in time and in full and winds down its real estate projects whilst further strengthening its cash flow profile. In the event of changing the outlook to stable because of less refinancing risk, Moody's could also envisage aligning the current B3 PDR with the B2 CFR.

The CFR at the B2 level positions the rating in line with other Dubai-based corporates that have substantial exposure to the local real estate market such as Emaar (rated B1/negative), Jafz (B1/ratings under review for possible downgrade), GGICO (B1/negative) and DIFCI (B3/negative). Ratings could be subject to upside pressure as the group's debt load gets reduced with asset disposal proceeds and the group's cash flow profile continues to benefit from its recurring income streams.

Moody's last rating action on DHCOG was implemented on 3 January 2011, when the rating agency downgraded the company's senior unsecured debt ratings to B3 from B2. Moody's maintained DHCOG's ratings on review for possible downgrade.

The principal methodologies used in this rating were Government-Related Issuers: Methodology Update published in July 2010, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Dubai Holding Commercial Operations Group LLC (DHCOG) is a wholly owned subsidiary of Dubai Holding LLC (DH) and incorporates all the non-financial investment businesses of the group, essentially real estate and hospitality businesses as well as free zones in Dubai. The group also has sizable investments in the telecom sector.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of maintaining a credit rating.

Moody's adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

DIFC - Dubai
Martin Kohlhase
Asst Vice President - Analyst
Corporate Finance Group
Moody's Middle East Limited
Telephone: 00971 4237 9536

London
David G. Staples
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
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Moody's Middle East Limited
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DIFC - Dubai
UAE
Telephone: 00971 4237 9536

Moody's confirms DHCOG's B2 CFR, B3 MTN ratings; outlook negative
No Related Data.
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