Fitch affirms TDIC’s AA ratings

Fitch Ratings has affirmed Abu Dhabi-based Tourism Development & Investment Company’s (TDIC) long-term issuer default rating (IDR) and senior unsecured rating at AA and short-term IDR at F1+, the agency said in a statement, adding that the outlook for the long-term IDR is stable.

The affirmation also affects both TDIC Finance’s global medium-term note programme with $1 billion of outstanding notes and TDIC Sukuk’s Sukuk programme with $1bn of outstanding trust certificates.

Fitch applied its parent and subsidiary rating linkage methodology in rating TDIC, concluding that a strong relationship exists between TDIC and the Emirate of Abu Dhabi (AA/Stable/F1+), which results in TDIC’s rating being aligned with Abu Dhabi’s sovereign rating. The primary rating driver for TDIC is its strong ties to the sovereign. The agency would not be able to rate this entity on a standalone basis due to its very limited operational assets.

“The Government of Abu Dhabi’s 13 January announcement made a forceful statement of support for its flagship sovereign-owned entities, stating that ‘broad and ongoing support will be offered exclusively’, namely to Mubadala Development Company, International Petroleum Investment Company and Tourism Development & Investment Company, all of which are rated the same as the sovereign, and Taqa, which is not rated,” said Bashar Al Natoor, Director in Fitch’s EMEA Corporates team in Dubai.

The government has consistently provided TDIC with substantial levels of direct financial support, including the provision of free land, recognised by TDIC as equity contributions. In 2010, the government provided monetary grants and low interest long-term debt instruments, totalling about Dh1.9b and Dh1b, respectively.

TDIC was established in 2005 through Emiri Decree No. 12. It is fully owned by the Government of Abu Dhabi, via Abu Dhabi Tourism Authority (ADTA), which is mandated to help drive economic diversification through supporting and expanding the Abu Dhabi tourism industry.

Additionally, TDIC’s 100 per cent state ownership status is mandated by law and unlikely to change. It can only be dissolved after 2105 (100 years from its formation) by Emiri decree or if its mandate is deemed complete.

A change in Abu Dhabi’s ratings would result in a change in TDIC’s ratings. Any change by the government in its implied support, commitment or ownership of TDIC could also have negative rating implications for TDIC.

TDIC’s mission, as set forth by the government, is to develop and manage Abu Dhabi’s tourism investment zones and it is equipped to act as master developer for large scale tourism projects. TDIC also works closely with private sector developers, whose involvement is a key priority of the government's broader economic strategy. TDIC is in the early stages of development with large on-going project investment needs, and currently does not have significant operating assets. Hence, cash flow generation and profit are presently considered minimal.

TDIC’s current portfolio is managed and financed in a similar manner to the private sector.

Saadiyat Island, a modern mixed-use integrated community, which houses Saadiyat Island Cultural District, that will include the Zayed National Museum, Louvre Abu Dhabi, and Guggenheim Abu Dhabi museum, is TDIC’s flagship development.

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