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2nd UPDATE: Dubai Hldg Unit To Repay $500M Bond From Cash Flow

Tuesday, Dec 06, 2011

-- DHCOG says will repay $500 million bond maturing in February 2012

--Says operating liquidity and capital adequacy remain good

--Has no plans to refinance or restructure outstanding loans

(Adds material on JAFZ bond talks in 8th and 9th paragraphs.)

By Nicolas Parasie and Nour Malas

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)-- Dubai Holding Commercial Operations Group , the real-estate and hospitality arm of Dubai Holding , said Tuesday it will repay on time a $500 million bond that matures next year, after ratings agency Moody's Investor Service warned that three Dubai government-related units including DHCOG may face refinancing risks in 2012.

" DHCOG will repay the $500 million bond when it matures in Feb 2012, from its own internal cash flow," a DHCOG spokesperson said in an emailed statement. DHCOG is part of Dubai Holding , the conglomerate owned by Dubai's ruler Sheik Mohammed bin Rashid Al Maktoum.

DHCOG 's statement follows a warning by Moody's earlier Tuesday that DHCOG is one of three government entities in Dubai facing refinancing risks, alongside Jebel Ali Free Zone , or JAFZ , and DIFC Investments. Moody's said all three entities, which have a combined $3.8 billion in debt maturing next year, may experience ratings volatility as they move closer to next year's debt maturity dates.

Moody's also raised concerns about Dubai's potential need for further financial support in the absence of capital-raising measures. The emirate in total holds around $101.5 billion of debt linked to the Dubai government and its state-owned non-financial corporates, according to the report.

But DHCOG said in response that its operating liquidity and capital adequacy remain good and that it has a "healthy revenue stream from its diverse portfolio of income generating assets, held by its hospitality, business parks and real-estate companies."

The Financial Times reported Tuesday that Dubai had raised the possibility of restructuring some of the bond payments due next year, as it mulls options for meeting the obligations of government-related entities.

But DHCOG said it has no plans "to refinance or restructure its outstanding loan commitments and remains committed to meeting all its financial obligations as and when they fall due."

And a banker familiar with the talks said that JAFZ has held talks with bondholders on options for refinancing its 7.5 billion U.A.E. dirhams ($2.04 billion) Islamic bond due next year, but hasn't discussed restructuring or delaying payments on the bond.

"The conversation was: will you be willing to open a new facility that would go to repaying the sukuk (Islamic bond), and you have no net increase or decrease in exposure to me," the banker said. "There weren't talks on restructuring or amending the terms of the bond," the banker said.

A JAFZ official declined to comment.

Moody's said it isn't aware of any talks about restructuring the bonds issued by the three government-related entities.

"We are certainly aware that all three issuers-- DIFCI , JAFZ and DHCOG --are focusing on refinancing. We're not aware those discussions have evolved into restructuring," said David Staples, Moody's managing director for corporate finance.

Since its debt crisis erupted in 2009, Dubai has been scrupulous in repaying its bondholders, while focusing instead on extending payments on loans due to banks.

-By Nicolas Parasie and Nour Malas, Dow Jones Newswires; +9714 446-1681; nicolas.parasie@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

06-12-11 1432GMT