Fitch affirms Dubai Holding Commercial Operations Group at 'AA-'

Its Short-term IDR is also affirmed at 'F1+'. The Outlook on the Long-term IDR remains Stable. The action affects nearly $3bn of bonds outstanding.

The ratings reflect DHCOG's ownership structure and strategic position in the development of Dubai as a commercial/business and tourism/leisure hub. DHCOG is effectively 100%owned by Dubai Holding LLC, which is 97.5%-owned by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and the ruler of Dubai. The remaining 2.5% is owned by His Excellency Mohammad Al Gergawi. The latter is Executive Chairman of Dubai Holding LLC and UAE Minister of State for Cabinet Affairs and Chairman of the private office of His Highness Sheikh Mohammed Bin Rashid Al Maktoum. The ownership structure links DHCOG extremely closely to the emirate of Dubai, whose government controls its strategic development. There are no plans to change the ownership of DHCOG. Fitch's assessment of Dubai's creditworthiness is consistent with an 'AA-' (AA minus) IDR.

DHCOG has business interests in the real estate, hospitality and leisure and telecommunications and media sectors. The first two account for about 85% of total revenues. Real estate activities are conducted through four subsidiaries - Dubai Properties LLC, Tatweer Dubai LLC (Tatweer), SAMA Dubai LLC (Sama) and TECOM Investments FZ LLC (Tecom). Dubai Properties is the main property development arm of DHCOG. One completed key project was Jumeirah Beach Residences, which generated revenue of Dhs5.9bn in 2007. Other key projects under development include Business Bay, a development of offices and residential towers; The Villa, a development of Spanish style villas and Culture Village, a mixed-use development.

The main project of Tatweer is Dubailand, a 2.5 bn sq ft project with a tourism, leisure and entertainment focus. Included in Dubailand is the Al Bawadi project, with 31 themed hotels on a 10 km stretch. Apart from Dubailand, Tatweer is also developing Dubai Industrial City, a 560 msq ft industrial zone catered to light industries. Tecom's key activities are the operations of the free zones (i.e. zones that allow 100% foreign ownership) in Dubai. The main zones are Dubai Internet City (IT), Dubai Media City and Dubai Knowledge Village (providing infrastructure for international educational institutions).

In 2007 DHCOG restructured its hospitality sector, Jumeirah Group, by grouping the ownership of hotels and other assets under Jumeirah Assets LLC and hotel management services under Jumeirah Management LLC. Jumeirah Group has a portfolio of five owned-and-managed hotels and four managed hotels with a total of 3,090 rooms. To date, Jumeirah Management has entered into a further 10 hotel management contracts in the Middle East, Europe, the Caribbean and Asia. These hotels are scheduled to open between 2008 and 2010. While these new contracts are likely to contribute to DHCOG's revenue over time, hotel ownership will be the main driver of financial performance over the medium term.