OREANDA-NEWS. S&P Global Ratings said today that it has affirmed its 'AA' long-term and 'A-1+' short-term issuer credit ratingson Mubadala Development Co. PJSC. The outlook is stable.

The affirmation reflects our view that there is an almost certain likelihood that the Emirate of Abu Dhabi (AA/Stable/A-1+) would provide timely and sufficient extraordinary support to Mubadala in the event of financial distress, even after the government's announcement on June 29, 2016, that it plans to merge the company with another 100% government-owned entity International Petroleum Investment Co. (IPIC).

We understand that IPIC and Mubadala will continue to operate independently until the joint committee concludes its assignment, which could take up to sixmonths. Both Mubadala and IPIC have outstanding commercial debt that will needto 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.

Regardless of where Mubadala's commercial debt obligations finally reside, we consider that the likelihood of the Abu Dhabi government providing extraordinary support to ensure their timely and full payment, in case of need, will remainalmost certain.

In accordance with our criteria for rating government-related entities, including Mubadala, our view that there is an almost certain likelihood of extraordinary government support is based on our assessment of the company's:

Critical role for the Abu Dhabi government, as its main vehicle for business development and diversification of the economy; and

Integral link with the Abu Dhabi government, its 100% owner.

Mubadala plays a critical role in the Abu Dhabi government's policy of diversifying the economy of the UAE through its mandate to invest in key social infrastructure and create globally integrated industry sectors in Abu Dhabi. The company enters into strategic partnerships and investments across multiple sectors and aims to strengthen the growth potential of Abu Dhabi's economy and help the government meet socioeconomic targets, as set out in its long-term plan, "The Abu Dhabi Economic Vision 2030." The operations of Mubadala and its subsidiaries encompass a wide range of activities, including semiconductors, metals, aerospace, communication technology, defense services, oil and gas, renewable energy, real estate and infrastructure, and health care. In addition, the company pursues financial investments to broaden its revenue and cash sources.

Mubadala has anintegral link with the government of Abu Dhabi, in our view, given that the Crown Prince is also the company's chairman. Of the seven boardmembers, two are members of the Abu Dhabi Executive Council.

Abu Dhabi's government does not guarantee the obligations of any of its whollyowned companies. However, in March 2010, it publicly stated its support for Mubadala through a press release issued by the Department of Finance. The statement quoted the Department of Finance's then Undersecretary, H. E. Hamad al Hurr Al Suwaidi, as saying that Mubadala, together with IPIC and Tourism Development and Investment Co. PJSC, was "irreplaceable" and that, in the government's view, "it is impossible to differentiate between the government and any of these entities in terms of credit risk because the government supports these entities fully and unconditionally." We consider this written statement to be an exceptionally strong and explicit articulation of government support. It is unprecedented in the Gulf Cooperation Council region. The government has reiterated its position of support for these companies to us on a regular basis since 2010, most recently in 2016. The government also reiterated the statement in the prospectus for its May 2015 $5billion notes issuance.

Since 2006, Mubadala has received regular and sizable equity injections from the government to fund acquisitions and investments. However, although the government may choose to contribute additional capital in the future, we note that Mubadala has not requested additional shareholder contributions since 2014. Mubadala expects future capital and investment expenditure will largely be funded by operating cash flow, borrowing from third parties, and selective asset disposals.

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 arating driver. This is because, in our view, the likelihood of extraordinary government support is almost certain and Mubadala is a non-severable arm of the government that executes strategic government policies, and we do not believe this is subject to transition risk.

The stable outlook on Mubadala reflects that on Abu Dhabi and our view that Mubadala's commercial debt liabilities will be honored in full, regardless of how the government decides to structure the merged entity. We expect to continue equalizing the ratings on Mubadala with those on the emirate. This reflects our view that, notwithstanding the merger with IPIC, there is an almost certain likelihood that the Abu Dhabi government would provide timely and sufficient extraordinary support to Mubadala in the event of financial distress.

Any rating action on Abu Dhabi would result in equivalent action on our ratings on Mubadala.

Should we, for any reason, view the merger process as resulting in a reductionof the government's full and unconditional support for Mubadala's debt obligations, we could reassess the likelihood of extraordinary support downward and potentially lower the ratings.