UPDATE 2-S&P deals blow to Dubai Hldg unit, pulls rating

* S&P says ability to meet 2010 debt maturities in doubt

* S&P cites lack of information, uncertainty about govt aid

(Adds detail, DHCOG response, analysts)

By Rachna Uppal and Nicolas Parasie

DUBAI, Jan 25 (Reuters) - Standard & Poor's pulled its rating on a unit of Dubai Holding, dealing a fresh blow to the Gulf Arab emirate's financial reputation and drawing fresh scrutiny from investors.

The ratings agency cut Dubai Holding Commercial Group (DHCOG) to B from BB+ and then withdraw the rating altogether, citing its "materially weaker" cash position and a lack of information.

"It was certainly a very severe note, and seems to lend credence to the doubts that have been expressed about Dubai Holding for some time," said David Butter, director for the Middle East and North Africa at Economist Intelligence Unit, in London.

Dubai rocked global markets on Nov. 25 when it sought a debt delay on $26 billion linked to its flagship conglomerate, Dubai World [DBWLD.UL]. [ID:nLDE60O031]

DHCOG -- the holding firm of Dubai Holding's property, business parks and hospitality units which includes the planned Tiger Woods golf resort -- is part of an investment vehicle owned by Dubai's ruler.

In a statement, DHCOG dismissed the S&P announcement which it said contained inaccuracies and factual errors, and said the ratings agency did not understand its operations or its relationship with the Dubai government. [ID:nWEB6491]

Dubai has faced heavy criticism over its lack of transparency especially in the wake of November's debt news.

Earlier this month, the government acknowledged a $10 billion lifeline from Abu Dhabi in December -- which helped Dubai World stave off bankruptcy on a $4.1 billion Islamic bond by a property unit -- included $5 billion that was previously announced.

"I think the market already assumes all these Dubai Inc entities have more debt issues that they need to work out, but the worry is that transparency seems to be getting worse, which could be an issue going forward," said Robert McKinnon, chief investment officer at ASAS Capital in Dubai.

POOR TRANSPARENCY

"Without proper transparency, we cannot know the true value of the assets Dubai entities own or the true size and scale of their debts."

"We understand from the information we have gathered that cash flow generation for Dubai Holding Commercial Operations Group is likely to be materially weaker than we initially expected, which in our view significantly deteriorates DHCOG's liquidity position," S&P analyst Pierre Georges said in a statement.

S&P said the unit could face difficulty in refinancing and it was doubtful the Dubai government would lend it support.

Dubai credit default swaps stood at 455 basis points, 10 basis points tighter than Friday's close. There was no price for the illiquid Dubai Holding.

Dubai Holding is made up of DHCOG, Dubai International Capital and Dubai Group, which own foreign assets including stakes in HSBC (HSBA.L), Madame Tussauds and Travelodge.

S&P estimated that DHCOG would face lower sales and lower selling prices of real estate units, adding that its "exposure to the severe downturn in the Dubai real estate market also constrains its credit quality."

"We understand that free cash flows are likely to be negative for 2009 and 2010, which we believe will deteriorate DHCOG's liquidity position and could ultimately weaken its ability to meet its 2010 debt maturities," S&P said.

Dubai Holding has about $1.14 billion of debt maturing in the first half of this year. DHCOG is estimated to owe two thirds of the group's debt, which was underpinned by a net asset value of $10 billion at the end of 2008.

Creditors are awaiting a standstill proposal from Dubai World on how it plans to restructure some $22 billion in debt, linked to its main property units Nakheel and Limitless World.

On Sunday, DHCOG said it had made about $100 million worth of scheduled distribution payments on three bonds due over the next five years.[ID:nLDE60N05W] (Writing by Amran Abocar; Editing by David Cowell)