Fitch Downgrades Dubai Holdings Commercial Operations Group

You'll remember a while back there was quite a "war of words" between S&P and DCHOG when S&P downgraded them to B.   Among one of the countercharges levied by DCHOG was that S&P really didn't understand what it was doing.  That it had a  "lack of understanding of DHCOG's business, its operations and relationship with the Government of Dubai."

Yesterday Fitch weighed in with a downgrade to B+ - marginally higher than S&P's,  However, their comments will give cold comfort to DCHOG.

1. The rating action reflects Fitch's amended rating approach for DHCOG. The agency now rates DHCOG on a standalone basis rather than a top down parent and subsidiary basis. This is due to a continuing lack of substantive information on the government's ability to support the group in case of need.
2. DHCOG is on ratings watch negative.  The resolution of the RWN could result in a downgrade of DHCOG's ratings by more than one notch.  
3. A resolution of the RWN will be contingent upon the receipt of DHCOG's audited 2009 annual accounts, confirming the group's ongoing ability to generate cash flow, retain adequate liquidity and avoid a potential covenant breach at the December 2009 test date. The removal of the rating watch will also be contingent upon DHCOG successfully refinancing the upcoming July 2010 facility, or obtaining additional government funds to repay the facility.

In terms of the basic standalone credit analysis, the two rating agencies are in broad agreement.  The difference between their two ratings is immaterial.

DHCOG can take comfort from the fact that there is no harsh criticism about information flow and adequacy of documentation.  Otherwise Fitch seems to be pretty much on the same page as S&P.  And as well perhaps from Fitch's apparent willingness to factor in government support.  It's question mark seems to be "ability" not "willingness".