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Emaar Gets First Investment Grade in Four Years on Dubai Rebound

Feb. 5 (Bloomberg) -- Emaar Properties PJSC, the builder of the world’s tallest tower, got an investment grade rating for the first since time in four years at Standard & Poor’s as Dubai’s property market recovers.

The rating was raised to BBB-, the lowest investment grade, with a stable outlook from BB+, S&P said. Emaar was cut to junk in December 2009 amid a plunge in Dubai property prices and as the Gulf business hub staved off a near default with help from its richer neighbor Abu Dhabi.

“The rating action reflects the sound performance of Emaar’s high-quality, Dubai-based leasing and hospitality assets, which constitute a large share of total earnings,” S&P said. “The upgrade also incorporates Emaar’s successful launch and presale of new high-margin developments in Dubai.”

Dubai’s economic recovery has helped boost property prices as domestic output grew 4.9 percent in the first half, setting it up for the fastest pace in six years in 2013. Values for mid-range apartments in the city rose 43 percent in 2013 after 18 percent in 2012, according to Cluttons LLC data. Home prices this year may jump 35 percent to 40 percent, Land Department General Director Sultan Bin Mejren said last month.

Emaar’s risk profile improved following the presale of properties, increase in recurring income and after it converted bonds valued at $475.7 million into shares, S&P said. The company has $2.5 billion of debt outstanding, including a $500 million Islamic bond due in August 2016.

The yield on the 8.5 percent sukuk declined 21 basis points to 2.87 percent at 4:44 p.m. in Dubai.

The company, which has the biggest weighting on Dubai’s benchmark stock index, may report a 13 percent increase in 2013 profit, according to the mean estimate of 13 analysts compiled by Bloomberg. The shares gained 3.8 percent so far this year, after more than doubling in 2013.

To contact the reporter on this story: Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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