UAE. Moody's Investors Service has taken multiple rating actions on four government-related issuers (GRI's) in Dubai.

The A1 ratings of DP World, DIFC Investments (DIFCI) and Dubai Electricity & Water Authority (DEWA) were placed on review for possible downgrade.

The ratings of Jebel Ali Free Zone (Jafz) were downgraded by one notch to A3 from A2 and placed on review for further possible downgrade. In addition, Moody's has withdrawn the rating for Jafz's MTN programme, under which there have not been any issuance.

The A3 ratings of Dubai Holding Commercial Operations Group (DHCOG) and the Baa1 ratings of Emaar Properties (Emaar) were unchanged and remain on review for downgrade pending the merger of DHCOG's real estate activities with Emaar.

Today's rating actions reflect the still limited transparency on government policy and criteria towards the provision of support to government-related issuers in Dubai. Moody's takes comfort from the government's recent announcement of the creation of a Support Fund, which will provide financial support on commercial terms to government-related issuers that fulfil certain criteria. This has confirmed Moody's view that the probability of government support to its flagship corporates is very high, given recent precedents of government intervention to support companies facing refinancing shortfalls.

However, whilst the announcement emphasises the government's willingness to support its GRI's in principle, further disclosure is required on the specific conditions and mechanisms of such support, as well as on which of its GRI's are considered strategically important. Over the course of the ratings review, Moody's hopes to obtain further details on these issues, in order to re-assess the currently high government support that is factored into its Dubai GRI ratings. In particular, Moody's will assess the government's policy statement and the impact this has on current rating assumptions, as well as seek clarity on the relative strategic importance of rated GRI's in Dubai.

Moody's understands that a considerable amount of Dubai's USD 10 billion bond issued to the UAE Central Bank earlier this year, has since already been allocated to GRI's facing payment and refinancing challenges. This has confirmed the federal government's commitment to Dubai and its GRI's, which remains a key driver of credit quality in the Emirate. Moody's review will thus also seek guidance on the need for any additional federal support, as well as the impact of such support mechanisms on assuring timeliness of payment should liquidity constraints develop in the future.

At the same time, Moody's highlights the need for further refinancing amongst some of Dubai's highly visible GRI's, the most prominent being a USD 3.5 billion sukuk maturity at real estate developer Nakheel on 14th December 2009. Although not rated by Moody's, Nakheel's maturity remains a major test of the government's willingness to support state companies, which will ultimately determine the various degrees of government support that are factored into Dubai GRI ratings.

As stated earlier, the main focus of Moody's review on DP World, DEWA and DIFCI will rest on the aspect of government support, whilst their baseline credit assessments -- the measure of stand-alone creditworthiness excluding exceptional government support -- have not been changed.

Conversely, the rating action on Jafz incorporates a review of our government support assumptions, as well as a lowering of its baseline credit assessment. The latter is the result of Moody's no longer giving credit to funding arrangements between Jafz and its parent company, Dubai World, including receivables with related parties that amounted to more than AED 2 billion per 2008 year end, as a result of Dubai World's role as guarantor of Nakheel's December maturity. Neither Nakheel nor Dubai World are rated by Moody's. However, Moody's assumption of Jafz's liquidity arrangements with Dubai World being impaired weakens Jafz's liquidity and thus its fundamental credit profile, as reflected in afurther downgrade by one notch of both the standalone and the final rating to A3.

The principal methodology used in rating these entities was "The Application of Joint Default Analysis to Government Related Issuers", published in April 2005, which determines ratings on the basis of a company's baseline credit assessment, as well as credit enhancement for exceptional government support. Accordingly, ratings were assigned by evaluating factors we believe are relevant to the baseline credit assessment of the issuers, such as i) the business risk and competitive position of the companies versus others within its industry, ii) the capital structure and financial risk of the companies, iii) the projected performance of the companies over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of the companies' core industries and ratings are believed to be comparable to those of other issuers of similar credit risk. Other methodologies and factors that may have been considered in the process of rating the issuers can also be found at www.moodys.com in the Credit Policy & Methodologies directory.

The last rating action on DP World, DEWA and DIFCI was on 1st April 2009, when Moody's affirmed the ratings of all companies with a negative outlook. The last rating action on Jafz was on 8th July 2009, when Moody's downgraded its ratings to A2 from A1 and placed them on review for downgrade.

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