Thursday, Dec 08, 2011

Gulf News

Dubai Dubai’s government said last night that it was not planning to re-structure the debt of any state-owned companies in 2012.

Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of Dubai’s Supreme Fiscal Committee, said in a statement that the government was confident that state-owned companies would meet their financial obligations in the year ahead.

Shaikh Ahmad said that refinancing options were available to government-owned conglomerates, and that the government stood ready to help companies in any way it could.

“The government is following a solid financial policy that enhances trust in the ability of government-related companies to meet all their financial obligations,” Shaikh Ahmad said.

“The Government of Dubai may, where necessary, consider refinancing part of the financial obligations of government-related entities. The government… is fully prepared to support government-related companies through all available means.”

Moody’s prediction

The statement comes a day after Moody’s Investor Services suggested that state-owned entities including Dubai Holding Commercial Operations Group, Jebel Ali Free Zone and DIFC Investments — which together hold around $3.8 billion (Dh13.95 billion) of debt maturing in 2012 — are expected to face re-financing risks in 2012.

Frank Nowak, EMEA corporate finance analyst at Moody’s, told Gulf News yesterday: “We expect these companies could face rating volatility as they move closer to their debt maturities based on the ability and willingness of the Government of Dubai to support these entities.”

But David Staples, managing director for corporate finance at Moody’s, added that new agreements with bondholders were unlikely.

Bloomberg reported that Dubai’s bonds fell yesterday, led by state-owned business park operator Jebel Ali Free Zone and DIFC Investment, after the Financial Times cited an unidentified government official as suggesting the emirate may consider restructuring some bonds coming due next year.

Confidence lauded

This was directly refuted in Shaikh Ahmad’s statement. Analysts welcomed the government’s quick response to the speculation last night.

Haissam Arabi, CEO at Gulf Mena investments, told Gulf News that the markets were likely to respond well tomorrow.

“I think it’s good. I think that they were quick to respond and it is really encouraging,” Al Arabi said. “It is going to be well received in the markets tomorrow. The speed of their response shows a confidence and it is certainly what speculators in the market want to hear.”

By Orlando Crowcroft?Business News Editor

Gulf News 2011. All rights reserved.