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PROMISING? Aldar bonds may still offer value after yield plunge

PROMISING? Aldar bonds may still offer value after yield plunge

Aldar, which has developed flagship projects for Abu Dhabi such as the Yas Marina Formula 1 circuit and the world's first Ferrari theme park, has been hit hard by the property crash in the United Arab Emirates. The yield on 2014 bond is at record low after fresh government aid with some referring to the company as "Mubadala without a rating"

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January 6, 2012 8:43 by



Bondholders in Abu Dhabi property developer Aldar Properties, which received yet another government lifeline last week, have seen the yield on its 2014 high-yield bond tumble to historic lows this week. But the company’s debt may still offer value to investors looking for exposure to Abu Dhabi.

The yield on Aldar’s $1.25 billion, 10.75 percent bond maturing 2014 dropped to 5.52 percent on Wednesday, the lowest since issue in 2009. That was about 350 basis points tighter than in early October, when spreads of Gulf high-yield bonds in general widened sharply because of jitters about the euro zone debt crisis.

By contrast, the struggling developer’s share price has slumped to record lows in recent weeks because of fears of share dilution and an eventual delisting. The company has officially denied it has any plans to delist from the Abu Dhabi stock exchange.

Aldar, which has developed flagship projects for Abu Dhabi such as the Yas Marina Formula 1 circuit and the world’s first Ferrari theme park, has been hit hard by the property crash in the United Arab Emirates.

But for a private company not benefitting from direct government ownership, it has enjoyed a remarkable level of financial backing from the state. In January last year it received a $5.2 billion rescue package in exchange for some of its key assets. Early in December, state investment vehicle Mubadala converted a portion of its Aldar bonds into shares, as part of a deal that will eventually see the fund take its stake to nearly 60 percent. And last week, the Abu Dhabi government threw Aldar a new $4.6 billion lifeline, buying more of its assets and retiring a loan.



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