CAIRO, Egypt – IN the weeks since Dubai World shocked world markets with an announcement it needed to delay repaying US$26 billion in debts, Dubai has sought to reassure leery investors it remains the Middle East’s boomtown, albeit one temporarily facing some tough times.

The image revamp, however, has hit a roadblock as a leading ratings agency withdrew its ratings of a company owned by Dubai’s hereditary ruler, citing among other reasons the “lack of market transparency”.

In response to Standard & Poor’s announcement, Dubai Holding Commercial Operations Group — whose debt load is seen as the next litmus test of Dubai’s ability to pay its bills — accused the ratings agency of issuing “inaccurate statements” and a “lack of understanding” about its business. It also dropped the firm.

DHCOG’s terse statement and reaction underscores a contrast between what Dubai is saying it wants to do and what it is actually doing to boost investor sentiment, analysts said yesterday.

“At the moment, there seems to still be a ‘shoot the messenger’ syndrome in any attempt to shed light and bring transparency into how things stand,” said Cubillas Ding, research director at Celent, an international financial research and consulting firm in London, referring to the dropping of S&P.

“Here, it may be entirely appropriate for Dubai to streamline the flow of information to and from the Dubai GREs (government-related entities) with the media, investors and partners, but I think that Dubai still needs to do a more convincing job at the longer term issues,” said Cubillas.

While other ratings firms may not have acted, S&P’s move was the latest blow for Dubai, one of seven semiautonomous city-states making up the United Arab Emirates.

It comes as Dubai World, the emirate’s chief engine for growth, has been looking to negotiate a “standstill agreement” on US$26 billion of its US$60 billion in debts — bills amassed during a decade of growth fuelled by cheap credit used to finance multibillion- dollar projects.

In its announcement, S&P said it lowered its long-term corporate credit rating for DHCOG to B from BB+, assigned a negative outlook and removed it from CreditWatch with negative implications. It subsequently withdrew the ratings, in part because of what it considered to be a “lack of market transparency, reliable market data, and the level of available financial information”.

Along with concerns about the company’s exposure to the Dubai real estate market and potentially deteriorating liquidity position, S&P said the decision reflected “lower certainty about ongoing support from the Dubai government, which we previously factored into the rating as a key credit strength”. The downgrade put DHCOG even more firmly into junk status.

DHCOG, which is overwhelmingly owned by Dubai’s ruler, Sheik Mohammed bin Rashid Al Maktoum, responded by dropping S&P as its rating agency because of “its lack of understanding of DHCOG’s business, its operations and relationship with the Government of Dubai”.

S&P “issued inaccurate statements coupled with factual errors that are misleading”, DHCOG, which has extensive real estate interests, said in its Monday statement, stressing it remained committed to full transparency.

Moody’s Investor’s Service held its ratings steady for DHCOG at B1 — unchanged from December and also in junk status.

“We’ve already been quite a bit lower than others,” said Philipp Lotter, Moody’s Dubai-based senior vice president. “A lot of that factored in our concerns over the real estate sector and Dubai Holding’s exposure (to that sector) … and also the weakened transparency … we’ve seen over the last 12 months.”

S&P’s move was merely the latest indication of the uncertainty that has swirled around Dubai since Dubai World announced in November that it was facing debt issues.

As the world’s worst recession in over six decades battered world economies, Dubai World, once seen as the window into the city-stake’s growth, became a cloudy crystal ball offering a glimpse into the broader challenges facing Dubai, which some analysts believe owes as much as US$100 billion.

Amid fallout from the conglomerate’s debt problems, Dubai’s government in recent weeks has revamped the ruler’s media office, outlined a new legal framework that promises to boost transparency and set in place clearer bankruptcy rules, and has reorganised some elements of the government to reduce bureaucracy.

In addition, less than two weeks ago, reports surfaced that the bailout offered to Dubai by Abu Dhabi, the oil-rich emirate that heads the UAE’s presidency, was actually just half of the US$10 billion initially reported.