Fitch: Mubadala's ratings unaffected by ATIC integration

The agency believes that the deal has no implications on the implied support of, commitment from, and ownership of Government of Abu Dhabi('AA'/Stable) for Mubadala, which is the main driver of its ratings.

Mubadala announced today that ATIC has become a wholly owned business of Mubadala effective as of 1 January 2011. The transfer occurred through Mubadala recognising ATIC as additional shareholder contributions at ATIC's 31 December 2010 net book value, in kind, with no cash payment from Mubadala. Therefore, ATIC's financials will be fully consolidated by Mubadala and ATIC will be fully incorporated in Mubadala's budgeting process going forward. Mubadala's 2011 budget, approved by the Government of Abu Dhabi, includes ATIC's 2011 capex requirements.

"Fitch continues to apply its parent and subsidiary rating linkage methodology in rating Mubadala, as it believes that a strong relationship exists between the company and the Emirate of Abu Dhabi. As such, Mubadala's rating is aligned with Abu Dhabi's sovereign rating," says Bashar Al Natoor, Director in Fitch's EMEA Corporates team in Dubai.

The Government of Abu Dhabi's 13 January announcement made an extremely forceful statement of support for its flagship sovereign owned entities (SOEs), stating that "broad and ongoing support will be offered exclusively", namely to Mubadala Development Company PJSC, International Petroleum Investment Company (IPIC) and Tourism Development & Investment Company (TDIC), all of which are rated the same as the sovereign and Taqa (not rated).

Mubadala's 100% state ownership status is mandated by law and unlikely to change. It can only be dissolved after 2052, 50 years from its formation, by Emiri decree, or if its mandate is deemed complete. Established in 2002 through Emiri Decree No. 12, Mubadala is the primary business development company of Abu Dhabi. It has a mandate from the government to drive economic diversification to improve social development and build wealth for future generations. Mubadala's mission, as set forth by the government, is to achieve commercial returns while advancing the government's broader policy aims, including building Abu Dhabi's new economy, and improving the quality of life for the people of Abu Dhabi. Five members of the Abu Dhabi Executive Council sit on the company's board, the most prominent of which is the Chairman, His Highness Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi.

As at 31 December 2009, the government's cumulative capital contributions into the company since its establishment totalled Dhs48bn. Of the capital contributions of up to Dhs13bn approved by the government for 2010, Dhs2.2bn has been received by the company as at 30 June 2010.

A change in Abu Dhabi's ratings would result in a change of Mubadala's ratings. Also any change in the implied support of, commitment from, and ownership by the Government of Mubadala could have negative rating implications for Mubadala.

ATIC is one of the main investment arms of the Government of Abu Dhabi in the technology sector. Before ownership was transferred to Mubadala, ATIC was wholly owned by the Government of Abu Dhabi. ATIC owns 86% of GLOBALFOUNDRIES ('BBB'/Positive).