FITCH Ratings has upgraded UAE-based port operator DP World's long-term Issuer Default Rating (IDR) to 'BBB' from 'BBB-' and short-term IDR to 'F2' from 'F3', and described the company's outlook as stable.
DP World's rating is upgraded by Fitch; outlook 'stable' FITCH Ratings has upgraded UAE-based port operator DP World's long-term Issuer Default Rating (IDR) to 'BBB' from 'BBB-' and short-term IDR to 'F2' from 'F3', and described the company's outlook as stable. The upgrade reflects the group's solid and stable cash flow generation. In addition, "we believe the flexibility embedded in the group's expansionary plan will allow DP World to maintain Fitch-adjusted leverage below 5x, which is commensurate with the higher rating," Fitch Ratings said. "DP World's credit profile is supported by the geographical diversification of its business, the high utilisation rate of its terminals, which supports the group's pricing power as well as the long-term maturity of its main concession. "This ensures long-term visibility of group cash flow generation. The lack of covenants and other creditor protective features in DP World's debt structure is a weakness. However, this is largely offset by its well-established access to the capital markets and solid liquidity position, which mitigates the refinancing risk," said Fitch. "DP World has progressively expanded its operations to under-containerised markets that offer growth opportunities, leveraging on its well-established Dubai asset. "At YE2015, the group generated 60 per cent of EBITDA in Dubai and the remaining 40 per cent in Africa (14 per cent), Asia/India (14 per cent), American/Australia (nine per cent). Europe accounts for a modest three per cent of group EBITDA as some assets are still in a ramp up phase (London Gateway). "This geographical diversification should mitigate negative performance during an economic downturn. The recent upgrade of most of the group's key ports to capture the latest generation of 18,000 TEU capacity containerships helps preserve DP World's competitive position." Under Fitch's rating case, consolidated container throughput will remain flat in 2016 and moderately increase thereafter (+1.1 per cent average in 2017-20) largely underpinned by additional capacity at the group's port terminals.