Abu Dhabi – Mubasher: S&P Global Ratings affirmed the long-term and short-term credit ratings on Mubadala Development and International Petroleum Investment Company (IPIC), the newly merged sovereign wealth funds.

The agency maintained the “'AA' long-term and 'A-1+' short-term issuer credit ratings” with a "stable outlook" on both companies, according to its report on Tuesday.  

Earlier, the government announced that the emirate's Crown Prince Sheikh Mohamed bin Zayed resolved to merge Mubadala and IPIC for synergies. In this context, a joint committee, chaired by the UAE's deputy prime minister Sheikh Mansour Bin Zayed Al Nahyan, will be created to oversee the merger. The investment companies will continue to operate independently until the committee concludes its assignment, which could take up to six months.

On the background that both companies have a remarkable commercial debt, the rating agency saw that “It is currently unclear which, if either, of the current entities will continue to exist, or if a new holding company will emerge.”

However, the global agency believes that the government of Abu Dhabi will provide exceptional support to ensure a timely and full repayment of all dues as Mubadala is a leading and main vehicle for business development and diversification of the economy, mandating to invest in key social infrastructure and to create globally integrated industry sectors.

“Because we equalize our long-term rating on Mubadala with that on the sovereign, our assessment of the company's stand-alone credit profile is not a rating driver. In our view, the likelihood of extraordinary government support is almost certain, the entity is a non-severable arm of the government, and executes strategic government policies, and we do not believe this is subject to transition risk.”, the agency viewed.

No doubt the likelihood of this view prompted the agency to assign the stable outlook as debt liabilities will be fully honored notwithstanding the structure of the merged entity.

At last, the agency concluded that any changes to the ratings on Abu Dhabi government would result in equivalent changes to the ratings  on Mubadala that has a portfolio of investments and assets worth more than  AED 246.42 billion ($67.1 billion)