ETA on S&P negative watch over debt fears
Dubai, November 22, 2008
Ratings agency Standard & Poor's has put Dubai-based ETA Group on negative watch with a view to downgrading its credit rating due to concerns over the construction and property-dominated firm's increased leverage.
Standard & Poor's placed the firm, whose property division has a $10 billion portfolio, on CreditWatch with negative implications with long-term BBB- corporate credit rating, the ratings agency said in a statement.
It also put a 'BBB-' debt rating on a $300 million senior unsecured bank loan due 2012 issued by subsidiaries Emirates Trading Agency, ETA Star Holdings, and Associated Construction and Investments Company.
The potential downgrade to junk rating is the latest indication Dubai-based companies are feeling the squeeze from tighter lending conditions, a fall in property prices and a collapse in investor confidence as the global credit crunch begins to sweep across the Gulf Arab region's trading hub.
"These actions are due to concerns over increasing financial leverage, the likely adverse effect of the continuing global economic slowdown on ETA's cyclical activities, and low levels of headroom under financial covenants," said Standard & Poor's credit analyst Stuart Clements.
ETA's construction unit is the sixth largest UAE contractor, according to a survey by London-based Meed.
Its real estate arm ETA Star Properties told Reuters in October it planned to sell Islamic bonds worth up to $200 million in the first quarter of next year to fund expansion in North Africa and Europe.
The company said it was also planning to develop residential and office towers in the Russian capital Moscow with a value of $600 million next year.-Reuters