S&P downgrades Dubai govt entities on debt worry

NEW YORK Nov 25 (Reuters) - Standard & Poor's on Wednesday downgraded its ratings on several Dubai government-related entities after the government said it will ask creditors of two flagship firms for a standstill on billions of dollars of debt.

The government said the request is a first step toward restructuring Dubai World, the conglomerate that spearheaded the emirate's breakneck growth. For more, see [ID:nGEE5AO2L1]

"In our view, such a restructuring may be considered a default under our default criteria, and represents the failure of the Dubai government (not rated) to provide timely financial support to a core government-related entity," S&P said in a statement.

The agency lowered its issuer credit rating on DIFC Investments LLC by four notches to BBB-minus, or one notch above junk status.

It cut its rating on DP World Ltd Jebel Ali Free Zone by two notches to BBB-minus and lowered Dubai Holding Commercial Operations Group LLC by two notches to BBB-plus.

S&P lowered Emaar Properties PJSC by two notches to BBB-minus.

It left Dubai Multi Commodities Centre Authority and Thor Asset Purchase (Cayman) Ltd at BB, or two notches into junk, but placed their ratings on review for a possible downgrade.

The agency will resolve the CreditWatch placement following a review of the full impact of the restructuring announcement, which it expects to complete within three months.

Dubai has been hit hard by the credit crunch, which ended a six-year boom in the region and sent the emirate's property sector into a steep decline.

Dubai World has $59 billion of liabilities, while its Nakheel NAKD.UL unit has total debt of $80 billion.

The government's announcement sent the cost of insuring Dubai's debt against potential default sharply higher on Wednesday, while bond prices tumbled.

Five-year credit default swaps rose 100 basis points to 420.6 from a close of 318 a day earlier. Nakheel's Islamic bond prices fell more than 20 points to 87. (Reporting by Ciara Linnane; Editing by Leslie Adler) ((ciara.linnane@thomsonreuters.com; Tel: +1 646 223 6342; Reuters Messaging: ciara.linnane.reuters.com@reuters.net))