Fitch Ratings downgraded notes issued by UAE CMBS VEHICLE NO. 1 in the aftermath of Dubai World’s announcement that it would seek a six-month standstill of payments on its debt and that of its developer unit Nakheel.
“The proposed standstill on Dubai World and Nakheel obligations is a major negative shock to sentiment in Dubai, the UAE and the region more generally, where sovereign support has traditionally been strong,” Fitch said in a statement.
The agency cut $27.5 million in class A notes to ‘BBB-’ from ‘A+,’ $12.9 million in B notes to ‘BB’ from ‘A,’ and $12.5 million in C notes to ‘B’ from ‘BBB.’ All series were put on Outlook Negative as well. The entire issuance matures in June 2016.
The deal is backed by a single commercial real estate loan arranged by HSBC Bank Middle East and HSBC Bank plc. Securing the loan is a mortgage on an office building with 76 tenants located within Dubai’s Technology and Media Free Zone.
Since the announcement, Moody’s Investors Service had yet to make a move on the notes, which the agency rates ‘Aa3,’ ‘Baa3,’ and ‘Ba1’, respectively. However, the agency did downgrade the B and C tranches last June.