Wednesday, May 09, 2012

EDITED PRESS RELEASE

London, 09 May 2012 -- Moody's Investors Service today changed the outlook to developing from negative for the Corporate Family (CFR) and Probability of Default Rating (PDR) of Jebel Ali Free Zone FZE ("JAFZ") and affirmed the B2 CFR and PDR as well as the B2 rating for JAFZ's November 2012 certificates issued by JAFZ Sukuk Limited.

The change in outlook follows the announcement on May 2 of a consent solicitation inviting the holders of the AED7.5 billion (USD2.0 billion equivalent) certificates to adopt a resolution (meeting scheduled for May 24) to amend the certificates' conditions allowing for a redemption ahead of the November 2012 maturity and a trust dissolution coordinated with a financing package currently under negotiation.

RATINGS RATIONALE

The outlook change signals Moody's view that JAFZ has taken positive steps in addressing its November 2012 sukuk maturity that could remove some rating constraints factored into the current B2, especially liquidity risk, if finalised.

The announcement by JAFZ was coupled by a statement in its 2011 financials that JAFZ's going-concern status also rests on a facility mandate that has been signed with a consortium of banks in order to refinance a significant portion of the maturing sukuk with the company's pursuit to complement this facility with new Islamic trust certificates.

Were JAFZ able to successfully refinance its sukuk ahead of maturity and to shift its capital structure to a debt maturity profile of longer term nature, such actions would ease the pressure on the company's liquidity profile that remains sustained by a resilient business model and recurring cash flows. JAFZ's adjusted EBITDA margin in 2011 was around 80.0% following a strong operational performance after a year when revenues have marginally dropped. However, execution risk remains with regards to the timeliness of the transaction.

JAFZ is a government-related issuer as per Moody's definition. JAFZ's final B2 rating combines a baseline credit assessment (BCA) of 16 (equivalent to B3 on the global rating scale) and a one notch uplift stemming from Moody's low exceptional support assumption from the government in the event the company were to face financial distress.

JAFZ's BCA continues to rely on its inherently strong business model, which in turn rests on a large pool of rental contracts with diversified tenants that exhibit high occupancy levels and, to date, low churn rates. Moody's believes that JAFZ will manage to maintain adjusted EBITDA margins well above 60.0% (79.7% per end of 2011).

The BCA is constrained at the B3 level by the current high leverage, translating into an adjusted debt to EBITDA at 7.0 x (as per December 2011), even though it decreased from 7.8x per December 2010.

Furthermore, the current BCA incorporates the risk linked to the refinancing of the sukuk at higher debt cost, which could impact profitability, cash flow generation and interest coverage.

The developing outlook considers the range of potential outcomes (both in terms of ultimate leverage and cash cost of future indebtedness) as well as the ramifications for the company's certificates holders. Positive momentum for the B2 CFR could gradually emerge

1) as JAFZ executes and concludes the contemplated facility to support financing's completion and

2) if new Islamic certificates placement progresses per the company's plan.

On the other hand, the rating could be downgraded if there is increased risk of a funding shortfall.

The principal methodology used in this rating was Government -- Related Issuers: Methodology Update published in July 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Based in Dubai/United Arab Emirates, Jebel Ali Free Zone FZE is the operator of the Jebel Ali Free Zone, which is adjacent to Dubai's port and the largest business logistics hub in the Middle East.

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

09-05-12 0720GMT