Moody’s confirms DP World’s ratings with a stable outlook

Moody's Investors Service has confirmed the Ba1 issuer and Sukuk ratings of DP World, one the world's four largest container terminal operators, with a ‘stable’ outlook.
On December 8, 2009, Moody's lowered DP World's ratings to Ba1 and placed them on review for downgrade both as a result of wider reductions in government support factored into the ratings of all Dubai government-related issuers (GRIs), and concerns surrounding the restructuring of DP World's parent company, the government owned conglomerate Dubai World, and its potential implications for DP World.
Over recent months, and most recently in the announced restructuring proposal for Dubai World, many of Moody’s concerns regarding the possible contagion of the parent company's financial difficulties on DP World have been alleviated. Thus, DP World has to date been successfully ring-fenced from the restructuring activities of the wider group, and indeed neither its day-to-day business, nor its financial condition has experienced adverse actions on behalf of the parent. Furthermore, the recent restructuring proposal for the parent company has shown a renewed public commitment to safeguard healthy subsidiaries of Dubai World, including DP World, from any adverse actions from the parent. As a result, Moody's believes that further negative rating actions on DP World should now be contained.
DP World's overall 2009 financial performance was resilient despite a decline in consolidated volumes by 8%. The company has already recorded a 4% increase in volumes for the first two months of 2010 and we expect this trend to continue as the global recovery in trade volumes gains momentum. Moody's also takes comfort from the company's strong liquidity position, with approximately USD 2.9 billion of cash available as of year end 2009 and moderate maturities and capex requirements over the coming 12 months. Should DP World's operating environment continue to improve, whilst gradual settlement of Dubai World's creditors results in greater stability at its parent company and indeed enables viable Dubai-based corporations to return to the debt and capital markets, DP World's ratings could face further upside over time. For this to occur, Moody's would also expect the company to continue to balance its growth aspirations with the need to conserve cash, and maintain its financial profile within key financial parameters.