Moody’s assigns A1 rating to DP World

Moody’s Investors Service has assigned long term local and foreign currency issuer ratings of A1 to DP World, one of the world’s largest marine terminal operators. The outlook is ‘stable’.

“DP World’s ratings reflect the combination of a strong, diversified and global business profile and high government support”, says Dubai-based Philipp Lotter, Senior Credit Officer at Moody’s and lead analyst for DP World.

“At the same time, the expectation of rising financial leverage in pursuit of large investment programmes to grow capacity constrain ratings at present”, Lotter adds.

DP World’s A1 ratings reflect the group’s intrinsic credit strength and the additional enhancement that can be derived from the financial strength of the Emirate of Dubai, which 100% owns the group through Dubai World. Accordingly, Moody’s views DP World as a government-related issuer (GRI) and determines its rating in line with its methodology for such issuers.

In particular, ratings are supported by the company’s well-diversified, global operations and strong market position and its operational track record both domestically and abroad.

DP World operates the state-of-the-art Jebel Ali Port — the largest in the Middle East — and Port Rashid in Dubai as part of its portfolio of 42 terminals in 22 countries, acquired in recent years through CSX World Terminals and Peninsular & Oriental Steam Navigation Company (P&O).

Despite its global presence, Moody’s essentially views the operational and financial performance of its domestic operations as the backbone of the group’s fundamental creditworthiness, given the high margins and throughput that are achieved there.

Ratings are constrained by the expectation of rising leverage and a more aggressive financial profile as the company executes its expansion programme and re-aligns its capital structure.

Given strong growth in containerised traffic and global capacity constraints, DP World is expected to invest up to USD 3.5 bln over the medium term in both expansion projects and new developments. While the shipping industry is inherently cyclical and closely associated with global GDP growth, Moody’s takes comfort from DP World’s flexibility to defer certain investments, should currently strong demand patterns change.

While DP World remains fairly exposed to Dubai in financial terms, given the significant revenues it generates through its domestic ports and therefore the high correlation between these revenue streams and Dubai‘s economy, the material returns it generates from countries outside Dubai nonetheless reduces its dependence on Dubai to some degree.

DP World, headquartered in the Dubai International Financial Centre (DIFC), ranks amongst the world’s four largest container terminal operators by capacity and throughput, which in 2006, was 48.6 mln twenty-foot equivalent units (TEU) and 36.8  mln TEU, respectively (excluding POPNA, Shekou and Colombo which were divested in early 2007).