Abu Dhabi – Mubasher: The merger of International Petroleum Investment Compnay (IPIC) and Mubadala Development is ranked as a positive decision on two levels, according to a report issued by Moody's.

On the one hand, the combined entity will have "a stronger underlying credit profile than the individual entities" as operational synergies and the consolidation of investment area will bring greater potential benefits, said Rehan Akbar, AVP Analyst at Moody’s

On the other, the fusion is also seen "credit positive" for the government of Abu Dhabi that has now a wider room to limit contingent liabilities from and transfers to the combined entity, said Mathias Angonin, Analyst at Moody’s, adding, "this relieves some of the pressure on the sovereign at a time when Abu Dhabi’s fiscal balance is expected to turn in a deficit of 5.7% of Abu Dhabi’s GDP this year, from a nearly balanced position last year."

Both IPIC's and Mubadala's ratings, which are Aa2 negative, will not be affected by this move, the report indicated, clarifying "the combined entity will have total assets of around $125 billion and a gross debt/book capitalization of around 39% using year-end 2015 numbers."

The report concluded that this decision is in harmony with the state objectives for establishing strong commercially driven enterprises that can flourish on the long term.