DP World demands S&P withdraw credit rating

DP World has asked Standard & Poor's to withdraw its credit rating after a disagreement over the company's finances and ownership structure.

DP World, the shares of which are listed in Dubai and London, is owned 80 per cent by the Dubai Ports and Free Zone Authority, which is wholly owned by Dubai World, Pawan Singh / The National

DP World, the ports group based in Dubai, has asked Standard & Poor's, the US ratings agency, to withdraw its credit rating after a disagreement over the company's finances and ownership structure.

A spokeswoman for DP World confirmed the move.

Companies pay ratings agencies for assessments that are used to establish creditworthiness in international capital markets.

"We felt that the criteria S&P used for DP [World] were not an appropriate way of assessing the strong financial health and business profile of DP [World] and not compatible with how our peers are rated," she said.

In February, S&P, one of three agencies that rates DP World, gave it a rating of BB/B and downgraded its outlook from positive to stable.

The BB/B rating is termed "sub-investment" in the ratings business, implying below top-quality investment grade.

A DP World source explained there had been a difference of opinion between the company and the rater for several months, mainly about the status of DP World within the structure of companies known collectively as "Dubai Inc".

DP World, the shares of which are listed in Dubai and London, is owned 80 per cent by the Dubai Ports and Free Zone Authority, which is wholly owned by Dubai World, the government-owned conglomerate that in 2009 was forced to restructure US$24.9 billion (Dh91.46bn) of debts.

"We're applying a uniform set of investment principles on a global scale," said Stuart Anderson, the managing director of S&P in the Middle East. "From that point of view, we're delivering a rating that international investors will understand."

It is believed S&P's concerns centred around the level of financial support DP World might receive from Dubai World, and ultimately from the Government of Dubai, in the event of another financial crisis.

"We have to ask how strategically critical is the company, and how far away from government ownership is it. It's really about the credit rating of its parent and other assumptions about its finances," said an S&P source who did not wish to be named.

DP World retains investment grade ratings from Moody's Investors Service and from Fitch, the two other big ratings agencies.

DP World reported full-year profits of US$751 million for last year, up from $451m the previous year, boosted by the proceeds of the sale of its Australian business. It has no debt repayments until 2017, generates $1bn of cash per year, and has $1.5bn of cash in the bank. In March, it repaid $3bn of loans six months ahead of schedule.

On the Nasdaq Dubai market, DP World shares closed 4.91 per cent down yesterday at $10.46.