DP World – rating agencies conflict !

Moody’s goes POSITIVE while S & P goes NEGATIVE on DP World.

Does the debt capital market care? Not in the slightest. Most investors (including us!) are busy figuring out where they can extract value from the recent re-pricing of Dubai-related credit, and given the choppy nature of the actual debt valuations which have been the cause of many hours of lost sleep, recent ratings/outlook moves (up or down) have been rather superfluous to investors.

So, it’s with no great sense of occasion that we note that:

…on April 7 Moody’s removed DP World (the Dubai-based international ports operator) from negative outlook as “Dubai’s proposals to restructure the parent company alleviated concerns.” The agency went on: “Moody’s believes that further negative rating actions on D P World should now be contained.” This is clearly a POSITIVE action.

…a few hours later, S&P lowered D P World from “BB+” to “BB” with negative outlook, based on weaker than expected financials (NB: we commented on these 2 weeks ago in our weekly report), as well as the “remaining risk associated with possible knock-on effects until the debt restructuring of DWC (Dubai World, the parent company) is completed.” Dubai World is 80% shareholder of D P World, but D P World is not included in the DW restructuring. Needless to say this is a NEGAIVE action.

Bottom line is the rating agencies are under a lot of pressure not to stagnate in the current market environment, especially given the clear need to establish rules on government support issues. This is certainly not the first, nor will it be the last time the rating agencies conflict. From a market/investor point of view there’s too much noise for the agencies to be heard properly at the current time.