Thursday, Oct 13, 2011
DUBAI (Zawya Dow Jones)--The estimated $14 billion pile of debt linked to Dubai government-related entities, or GREs, that falls due next year is largely manageable as most of the maturities are at healthy GREs that can pay down, or refinance, with relative ease, analysts at investment bank JP Morgan said.
"Although a daunting headline number, details reveal that most of these maturities are largely manageable," JP Morgan said in a research report published Wednesday. "Only $3.3 billion of the above debt maturities --relating to JAFZA ($2 billion sukuk) and DIFC ($1.25 billion sukuk) --could be considered challenging--and would likely require some combination of debt reduction (via, for example, asset sales and/or equity infusion) and refinancing," it added.
GREs in the U.A.E. built up large debt levels in recent years amid heavy spending on developing sectors such as real estate, infrastructure and transportation, and on buying up foreign assets, in a bid to diversify local economies, transfer international know how and create jobs.
The International Monetary Fund warned earlier this year that Dubai faces "significant rollover risks" from having to repay its debt this year and next, and that the emirate would probably have to pay higher borrowing costs because of the absence of a well-defined and transparent strategy to address financing for government-related companies.
Of Dubai's total publicly-held debt of $113 billion, GREs account for $89.4 billion, or 81.2% of gross domestic product generated in Dubai and the northern emirates in 2010, the IMF said.
As far as the Dubai government is concerned, its first significant debt maturity in April 2013, when nearly $1.8 billion of bonds mature, the JP Morgan analysts said. After 2012, the debt maturity profile for Dubai government and GREs appears manageable through to 2015, they added.
Of the $23 billion debt estimated to be maturing in 2014, $18.5 billion is related to borrowings by the Dubai government from the U.A.E. Central Bank and the Abu Dhabi government (some of which was via Al Hilal Bank and National Bank of Abu Dhabi).
"We are assuming that this debt could be rolled over, if needed," the investment bank added.
Mohammed Al Shaibani, director general of Dubai ruler's court and chief executive of the Investment Corporation of Dubai told The Wall Street Journal last month that Dubai has completed the "major bulk" of its debt restructuring and is comfortable in its ability to tap bond markets when it deems it necessary.
-By Mirna Sleiman, Dow Jones Newswires; +9714 446-1698; mirna.sleiman@dowjones.com
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
13-10-11 0440GMT
