The credit ratings agency Standard and Poor’s says it will keep the high ratings for Abu Dhabi-owned investment groups Mubadala Development Company and International Petroleum Investment Company (Ipic), following their US$125 billion merger plan.
The ratings agency said the funds’ “AA” long-term and ”A-1+” short-term issuer credit ratings will remain because it is almost certain the government would provide financial assistance if they found themselves in distress. AA is S&P’s second-highest long-term investment grade after AAA.
“The stable outlook on Mubadala reflects that on Abu Dhabi, and our view that Mubadala’s commercial debt liabilities will be honoured in full regardless of how the government decides to structure the merged entity,” the agency said, repeating similar sentiments about Ipic in a separate release.
S&P said it has affirmed the ratings for Mubadala and Ipic following a review of their businesses. The agency maintained Abu Dhabi’s long-term debt rating at AA in February.
“We understand that Ipic and Mubadala will continue to operate independently until the joint committee concludes its assignment, which could take up to six months,” S&P said.
“Both Mubadala and Ipic have outstanding commercial debt that will need to be taken into consideration in the merger process. It is currently unclear which, if either, of the current entities will continue to exist, or if a new holding company will emerge.”
The merger will increase the diversification of Abu Dhabi’s economy and reduce costs, and comes amid a spate of consolidation. The decision comes weeks after the National Bank of Abu Dhabi and First Gulf Bank started merger talks.
The state-owned energy company Abu Dhabi National Oil Company is also streamlining operations to drive efficiency, performance and profitability.
Mubadala and Ipic have a similar amount of assets, making it more a marriage of equals, with few overlaps.
Less than 20 per cent of Mubadala’s assets are energy-related, whereas most of Ipic’s are in that sector. And while Mubadala’s focus is on the Abu Dhabi economy, Ipic mainly invests abroad.
Mubadala has stakes in Emirates Global Aluminium, green energy company Masdar, property developer Aldar and other groups. It also has stakes in GE and private equity company Carlyle Group.
Ipic owns the Spanish refiner Compañia Española de Petróleos and the Abu Dhabi diversified investment company Aabar. It also has stakes in Austria’s OMV, Austrian petrochemical group Borealis and Canadian petrochemical maker Nova Chemicals. Aabar has stakes in commodity trader Glencore and Italian bank UniCredit.
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