•    We believe there has been a decline in Tabreed's stand-alone credit profile (SACP) since the last downgrade in February.
•    In addition, we are revising our view of timely extraordinary government support for the United Arab Emirates-based district cooling company to "low" from "moderate."
•    We are therefore lowering our long-term issuer credit rating on Tabreed to 'CC' from 'CCC+'.
•    We are withdrawing our corporate credit and all associated debt ratings on Tabreed at the company's request.
 

LONDON (Standard & Poor's) March 9, 2010--Standard & Poor's Rating Services said today that it lowered its long-term corporate credit rating on United Arab Emirates-based district cooling company National Central Cooling Co. PJSC (Tabreed) to 'CC' from 'CCC+'. The outlook is negative.

In addition, the debt rating on the senior secured sukuk certificates due 2011 issued by Tabreed 06 Financing Corp. was also lowered to 'CC' from 'CCC+', and the debt rating on the subordinated convertible sukuk certificates due 2011 issued by Tabreed 08 Financing Corp. was lowered to 'C' from 'CC'.

At the same time, all ratings on Tabreed, Tabreed 06, and Tabreed 08 were withdrawn at the issuer's request

"The rating actions follow today's announcement by Tabreed of its intention to 'proactively engage with creditors to support a recapitalization', and on 'entering into discussions with strategic investors to provide the long-term capital necessary to support the development of the business'," said Standard & Poor's credit analyst Karim Nassif. "We believe that the potential recapitalization may include a review of the terms and conditions of existing outstanding debt and, consequently, is likely to lead to some form of distressed exchange of existing obligations."

The rating actions also take into account Tabreed's announcement of expected net losses of circa UAE dirham (AED) 1.118 billion for 2009 attributed to the Tabreed unconsolidated parent entity, based on the unaudited full-year 2009 results. These net losses include a significant noncash impairment of AED1.16 billion to reflect a reduction in the long-term value of projects entered into by the company.

As a result of these developments, we consider that there has been a decline in our SACP for Tabreed, which we now assess at 'CC'. In addition, we have revised our opinion of potential timely extraordinary support to Tabreed from the government of the Emirate of Abu Dhabi and/or its affiliates in the event of financial distress to "low" from "moderate."

In accordance with our criteria for government-related entities, our view of a "low" likelihood of extraordinary government support is based on our view of Tabreed's:

•    Role of "limited importance" to the state, as we believe that Mubadala, the 16.7% shareholder of the company, and/or the Abu Dhabi government is unlikely to provide full timely support to the entity in the current tightening liquidity position; and
•    "Limited" link to the Abu Dhabi government.


Following the downgrade, and at the request of the issuer, we have withdrawn our corporate credit rating on Tabreed, along with all ratings on the outstanding debt of Tabreed 06 and Tabreed 08.

RELATED RESEARCH
Enhanced Methodology And Assumptions For Rating Government-Related Entities, June 29, 2009

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