Thursday, Jun 14, 2012

--JAFZA refinancing follows deals at DHCOG and DIFCI

--Moody's had raised concerns about repayments of $3.8 billion this year

--Lighter schedule of maturities is expected next year

By Asa Fitch

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--The expected signing of a loan for Dubai's Jebel Ali Free Zone puts to rest earlier concerns that the euro zone crisis and lingering worries about the emirate's debt burden might cause difficulties at JAFZA and two other government-related companies facing a total $3.8 billion of debt repayments due this year.

JAFZA, which oversees the industrial free zone around Dubai's Jebel Ali port, is set to sign a $1.2 billion syndicated loan with a group of banks, a few days after raising a $650 million Islamic bond, or sukuk, earlier in the week. The new debt refinances a 7.5 billion U.A.E. dirham ($2.04 billion) sukuk originally set to mature in November, but which JAFZA now plans to repay ahead of time.

The refinancing is the last of several big debt deals that loomed over Dubai in 2012 and which had fed fresh worry about the emirate's business empire only a year after the state-owned Dubai World finalized a $25 billion debt restructuring. Dubai Holding Commercial Operations Group, an arm of Dubai Holding, and DIFC Investments, an investment arm of the Dubai International Financial Centre, are the other two government-related companies which have recently refinanced large borrowings due this year.

"The fact that Jafza, DIFCI and other Dubai government related entities are capable of meeting their financial obligations on time or even before maturity date is an indication on their sound financial planning, strong status and commitment towards their investors and creditors," said Abdulrahman Al Saleh, director general at Dubai's Department of Finance.

Ratings agencies Moody's Investors Service and Standard & Poor's late last year pointed to the debt maturing in 2012 at some of the emirate's biggest companies as a risk given the weak global economy, reduced lending from European banks due to the euro zone crisis, and volatile global markets.

In December, Moody's said that DHCOG, DIFC Investments and JAFZA "continue to face refinancing risks" in repaying their combined $3.8 billion of debt due in 2012. Dubai and its companies had a total of $101.5 billion of debt, Moody's estimated.

David Staples, the managing director of EMEA corporate finance at Moody's, said the recent completion of refinancings by the three government-related companies eased those earlier concerns.

"We saw there was execution risk because they were highly leveraged and completing any refinancing steps might be complex unless completed well in advance," he said. "In the case of (JAFZA) they've done a very good job on the execution front."

DHCOG in February repaid a $500 million bond using its own cash. Its parent, Dubai Holding, is owned by Dubai's ruler Sheikh Mohammed bin Rashid Al Maktoum.

DIFCI this month repaid a $1.25 billion Islamic bond, or sukuk, by raising a $1.04 billion loan and repaying the remainder from internal funds. DIFCI is owned by the government and manages a portfolio of property assets in the financial free zone as well as a range of investments including SmartStream, a financial software and transaction processing company.

Analysts say that Dubai faces a lighter schedule of debt maturities in 2013. Dubai's government-related companies have $5.98 billion of debt due next year, according to a recent IMF report, less than half of the total $12.89 billion maturing this year.

-By Asa Fitch, Dow Jones Newswires, +971 4 446-1685, asa.fitch@dowjones.com; Twitter: @ZDJnews

Copyright (c) 2012 Dow Jones & Co.

(END) Dow Jones Newswires

14-06-12 0922GMT