Aldar Properties has had the outlook for its ratings upgraded from negative to positive by Moody's Investors Service following a debt bailout by the Abu Dhabi government.
The developer, which posted full-year net profit of $175m in 2011 following multi-billion debts the previous year, had its corporate family and probability of default ratings upgraded.
Martin Kohlhase, vice president - senior analyst at Moody's , said: "The asset transaction agreements with the government of Abu Dhabi announced in December eliminate significant market and execution risk and will allow Aldar to reduce its debt load to an estimated AED4.5bn by 2015."
He added that the positive outlook "reflects the upward pressure on the ratings if Aldar continues to build a solid track record on the recurring revenue front while also maintaining the solid liquidity now in place to address medium-term maturities".
Although Aldar's cash inflows over the coming two years will be materially bolstered by funds from the government of Abu Dhabi, Moody's said it is also monitoring Aldar's track record in building over the medium term a recurring income stream from its investment properties.
It said that owing to the difficult market environment of the Abu Dhabi real estate market, Moody's has taken a more cautious stance on how quickly recurring net cash flows are likely to develop.
Moody's said it expects Aldar will over time generate at least a minimum of AED500m in recurring cash flows per year, while selling its property units and land to non-government third parties in 2012 and 2013 and putting in place longer-term financing arrangements for its estimated remaining gross debt maturing between 2014 and 2021.
Abu Dhabi's largest developer by market value, returned to black in 2011 after it posted a loss of AED12.7bn in 2010 on massive writedowns on its assets.
The company's board has proposed a dividend for the first time since the ailing company was rescued by Abu Dhabi in 2010 with a $5.2bn bailout.
The builder of the Yas Marina Formula One circuit made a fourth-quarter profit of AED182.1m, Reuters calculated, compared with a loss of AED11.14bn during the same period in 2010.
The Abu Dhabi government has given Aldar nearly $10bn in bailout funds, almost equivalent to the amount it extended to neighbouring emirate Dubai at the height of its 2009 debt crisis.
The most recent was a $4.6bn package, where the government bought assets from the struggling developer and retired a loan.
Abu Dhabi fared better than neighbouring emirate Dubai which saw a collapse in its property market and the restructuring of its flagship firm Dubai World.
However, the emirate is facing challenges now as a huge supply of high-end homes are expected to enter the market. Property prices in Abu Dhabi are expected to fall another 11 percent from here, a Reuters poll showed.