Standard & Poor's has downgraded the credit rating of the ETA Ascon Star Group, which has large debts coming due next year, and the company has in turn ended its relationship with the ratings agency. S&P lowered the engineering and property conglomerate's long-term corporate rating to "CCC" from "minus BB". ETA Star "faces material upcoming maturities and is likely to have lower than expected liquidity resources throughout 2010", the agency said. ETA Star also asked S&P to cancel its rating altogether, the agency said.
ETA Star executives declined to comment yesterday. The "CCC" rating means that S&P believes the company will have difficulty meeting its obligations unless its business or the prevailing economic conditions improve. ETA Star, which has subsidiaries in industries such as mining, health care and property development, has a US$300 million (Dh1.1 billion) senior unsecured bank loan coming due in 2012. The joint borrowers are Emirates Trading Agency, ETA Star Holdings, and Associated Construction and Investments, according to S&P.
In a note last month accompanying an earlier downgrade, the S&P analyst Mohammed Fayek said that ETA Star's debt profile was "largely short-term" and that the company would have trouble meeting its obligations. "Although we consider ETA's operations to be well diversified and predominantly conducted with large, well-established or government-related entities, we believe that the ongoing economic slowdown is having an adverse effect on demand and pricing in the group's main markets in the Gulf Co-operation Council, India and China," Mr Fayek wrote at the time.
In 2008, 55 per cent of ETA Star's revenue came from the Emirates, but the sharp slowdown across the conglomerate's most important industries was likely to harm its financial position. While the property development arm of ETA Star has delivered several buildings in the past year, including Liberty House near the Dubai International Financial Centre, it has eight projects still under development, according to the Real Estate Regulatory Agency's registry.
ETA Star was founded in 1973 as a joint venture between the Al Ghurair family of Dubai and Amana Investments of Hong Kong, the company's website says. bhope@thenational.ae