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DIFC Investments makes further loss; to sell assets

DIFC Investments makes further loss; to sell assets

2010 net loss $272 mln vs loss of $562 mln in 2009; DIFCI has $1.25 bln Islamic bond due in 2012; Plans asset sales in 2011, including SmartStream; Dubai Aerospace swings to 2010 profit

May 1, 2011 3:46 by

DIFC Investments (DIFCI), the investment arm of the firm that runs Dubai’s financial free zone, posted a further loss on Sunday, weighed on by its property portfolio, and said it plans to sell assets this year, including financial software firm SmartStream.

But the company said losses narrowed last year to $272 million from $562 million in 2009, helped by a return to profit at Dubai Aerospace, in which DIFCI has a 23.3 percent stake.

The Dubai-based aircraft leasing firm made a profit of $10.4 million after losing $21.1 million in 2009.

“The loss in 2010 was mainly attributable to the devaluation of the real estate portfolio due to the market conditions,” Chairman Ahmed Humaid Al Tayer said in a statement.

Among the assets the company plans to dispose of in 2011 is SmartStream Technologies, which it acquired in 2007 and helps investment banks and fund managers with the back and middle-office processing of stock, bond and derivative trades.

In October, Reuters reported that DIFCI was looking for a buyer for SmartStream and had hired UBS to help with the sale.

“Management expects that the disposal of D-Clear would be completed in 2011,” DIFCI said in its financial statement. According to financial statements, D-Clear Europe is the holding company of SmartStream.

DIFCI also plans to complete the sale of high-end Kuwaiti fashion retailer Villa Moda in 2011 having indicated its intention to sell the company in 2009.

“During 2010, certain circumstances arose which were considered unlikely and as a result, Villa Moda was not sold by the end of the current financial year,” it said, adding management expects a sale during 2011.

DIFCI has been grappling with a debt pile of more than $3 billion, hurt mainly by a fall in the value of its investments.

Although assets sales will be welcomed, a lack of clarity on short term debt repayments could still worry investors.

“It’s positive that they’re trying to divest non-core assets,” said Abdulkadir Hussain, chief executive of Mashreq Capital.

“Operating trends seem to be moving in the right direction, but in terms of the company’s financing capabilities, there are still questions to be answered.”

Revenue slipped to $146.3 million last year, from $152.2 million in the prior-year period.

Its financial statements showed that it has extended repayment of two $500 million loans due to the government of Dubai.

Repayment on one of the loans – split equally between May 2011 and May 2013 – has been deferred to 2014, while interest payments on the second loan, due 2013 in one installment, have been suspended for 18 months from March 2010.

The firm, a wholly owned subsidiary of Dubai International Financial Centre Authority, has a $1.25 billion Islamic bond, or sukuk, due in 2012.

Dubai, famous for extravagant real estate projects like man-made islands in the shape of palms and a world map, has been digging itself out of a debt crisis in the wake of a property slump.

By Rachna Uppal

(Additional reporting by Praveen Menon; Editing by Amran Abocar, Greg Mahlich)

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