Saturday, Mar 06, 2010

By Nour Malas

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Aldar Properties can continue to count on Abu Dhabi government support and will keep open its options on meeting its debt obligations, including asking for a government loan, the real-estate developer's chief financial officer said Friday, a day after Moody's Investors Service cut the firm's credit rating to junk.

"There has been no change in our working relationship with the government over the last two years," Shafqat Malik told Zawya Dow Jones in an interview. "It's been the same, or better."

Moody's on Thursday cut Aldar's credit rating to 'Ba1' from 'Baa2,' saying it assumes less government support will be forthcoming to the company. Aldar is partly owned by the government through shareholdings by wholly-government owned companies Mubadala Development Co. and Invest AD. It has 55% of its shares listed on the Abu Dhabi stock exchange, according to Zawya.com.

Moody's Thursday concluded a review of seven Abu Dhabi-based companies that it started in December last year, prompted by the restructuring of operations at Dubai government-owned conglomerate Dubai World to reevaluate assumptions of government support. All seven companies were downgraded.

Abu Dhabi government companies and government-related firms have borrowed heavily from international debt markets over the past year to fund their expansion and the government's aggressive development program. Companies fully owned by the government raised at least $9 billion in bonds and loans on international markets in the past year.

Thursday's downgrade moved the rating on Aldar, Abu Dhabi's largest developer, into junk territory, triggering a 1% increase in the coupon to 9.75% on a $1.25 billion bond Aldar has due in 2014.

The higher coupon rate, to start in November, will cost Aldar an incremental increase of 46 million U.A.E dirhams ($12.5 million) per year, or AED184 million over the four years until the bond matures, analysts said.

UNFORTUNATE

"It's unfortunate, because its their change in methodology," Malik said. "We just have to wait and see until the ratings agencies change their mind, basically."

Asked if Aldar would ask the government for a loan to help meet or refinance upcoming debt, Malik said: "We have got enough liquidity at this stage. We will keep our options open."

Aldar, which has a development portfolio worth over $70 billion, has won key projects from the government in recent years, including the Yas Marina development and a forthcoming residential housing project for U.A.E nationals. But Moody's said Aldar's portfolio "still contains a significant portion of commercial projects, which will require financing beyond 2011 and for which the support mechanisms are less certain."

The developer last month posted its first-ever quarterly loss and sold AED9.1 billion worth of infrastructure and property assets to the government from its Yas Marina development, including a prized Formula One racetrack.

The company's receivables for the fourth quarter of last year included that sale but payment with the government hasn't been settled yet, Malik said. He declined to comment on whether the payment would be in cash or on the form of a settlement mechanism.

Aldar made a surprise net loss of AED562 million in the fourth quarter, compared with a net profit of AED84.4 million in the same quarter of 2008, capping a year of few land sales that also saw the U.A.E. real-estate market being hit hard by the global economic downturn.

Moody's on Thursday placed a negative outlook on Aldar's stand-alone credit profile, citing ongoing medium-term risks that are "inherent with the real-estate sector." It kept the stand-alone rating unchanged at 'B2.'

The company's shares closed 2.3% lower Thursday at AED3.46 before the Moody's announcement.

-By Nour Malas, Dow Jones Newswires, +97150 2890223; nour.malas@dowjones.com

Copyright (c) 2010 Dow Jones & Co.

(END) Dow Jones Newswires

06-03-10 1101GMT