DUBAI, March 28 (Reuters) – S&P Global Ratings has downgraded Dubai’s DAMAC Properties to B from B+ and placed the BBB-(minus) ratings of Emaar Properties and Emaar Malls on creditwatch with negative implications, the ratings agency said in a statement.
It also lowered its outlook on DIFC Investments, a unit of the company running Dubai’s financial free zone, to ‘negative’ from ‘stable’.
S&P cited economic pressures from the coronavirus outbreak for the changes and said the ability of the government of Dubai to provide financial support for government related entities may weaken over the next one or two years.
The Dubai real estate sector has been struggling for years due to oversupply and sluggish economic growth.
Travel restrictions due to the coronavirus pandemic are now hitting Dubai’s tourism, which supports – among others – the emirate’s construction sector.
S&P said it based its assessments on the assumption the pandemic would peak between July and August.
“We now expect the fall in residential prices will be steeper than we previously expected, with adverse trends lingering well into 2021,” it said.
DAMAC, one of Dubai’s largest non state-linked developers, swung to a net loss of 36.9 million dirhams ($10 million) in 2019 from a profit of 1.15 billion dirhams in the previous year, the firm reported last month.
S&P said despite its negative outlook, the company’s liquidity remained “adequate”, with $115 million in debt due this year and no other major debt maturities until 2022.
S&P put Dubai’s largest listed developer Emaar Properties – which is 29.2% owned by state investment fund Investment Corporation of Dubai – and its subsidiary Emaar Malls on ‘creditwatch’ with negative implications.
This means they could be downgraded over the next three to six months, depending on the extent of the impact of the coronavirus pandemic and the weaker economic environment on their operations.
DIFC Investments, a unit of Dubai International Financial Centre, could also be downgraded, S&P said, if credit conditions in Dubai deteriorate, affecting the government’s ability to support the company. (Reporting by Davide Barbuscia; editing by Jason Neely and Mark Potter)