In response to a downgrade by Standard and Poor, Dubai Holding Commercial Operations Group dropped Standard & Poor's as its rating company because of a "lack of understanding of the business, its operations and relationship with the Government of Dubai".


"Dubai Holding Commercial Operations Group (DHCOG) drops Standard and Poor's (S&P) as rating agency due to its lack of understanding of the business, its operations and relationship with the Government of Dubai. Although DHCOG has been engaging with S&P and sharing adequate information frequently and in a transparent manner, S&P has nevertheless issued inaccurate statements coupled with factual errors that are misleading. Therefore, DHCOG discredits and disagrees with the content of the latest S&P report dated January 25, 2010," Dubai Holding Commercial said in a statement to Nasdaq Dubai.


Earlier Standard and poor said cash flow generation for Dubai Holding Commercial Operations Group is likely to be materially weaker than initially expected, dropping its rating it to B, down from BB+ and later withdraw the rating altogether.


January 26, 2010



Analysis and Forecast: Increasing Risk


The row between Dubai Holding and Standard and Poor will undoubtedly affect Dubai Holding more than it will Standard and Poor. The downgrade by Standard and Poor is bad news for Dubai and in itself increases risks of investments in the emirate, particularly given the hitherto close relationships between Dubai and Standard and Poor.


However, the way Dubai Holding has reacted is in fact a self-acknowledgement of lack of transparency. A company like Dubai Holding has been quite close to Standard and Poor and it would have been expected they were transparent with them about their position. However, breaking ties and then citing “lack of information” as the reason is no less than saying that information has been not forthcoming from Dubai Holding to the rating agency.


The  reaction therefore will carry even more negative consequences for Dubai as a whole as not only it confirmed Standard and Poor’s prediction by not denying it, but also by saying that Standard and Poor do not have all the facts. This raises serious question marks on whether investors in Dubai are in fact also not receiving the right facts, like Standard and Poor.