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Dubai’s JAFZA in debt talks, rules out govt aid
JAFZA not looking for government support; Cannot rule out option of asset sales
December 7, 2011 12:51 by Reuters
Hisham Abdullah al-Shirawi told Reuters on the sidelines of a business forum that the Dubai World unit was in talks with “many financial institutions and others” to refinance the dirham-denominated Islamic bond, or sukuk, due in November 2012.
The JAFZA issue has been flagged by rating agencies Moody’s and Standard & Poor’s as among the most problematic of Dubai’s repayments due next year.
The sukuk is not guaranteed by the government of Dubai and bondholders are predominately local banks. Shirawi said the majority of bondholders have been informed of the refinancing but declined to give further details.
“Our discussions with all our partners and other entities have been very positive,” Shirawi said.
“JAFZA is a successful entity and I’m sure that financial institutions have enough confidence in JAFZA in order to cooperate in providing for such (refinancing) requirements,” he added.
Asked whether asset sales would be an option for the repayment of the bond, Shirawi said: “I wouldn’t say that we are pursuing that option but it will depend on the overall picture. We cannot rule out that option.”
Shirawi is also chairman of Economic Zones World, which operates technology, logistics and industrial parks as well as free zones like JAFZA, under the Dubai World Group umbrella.
“We have enough entities within the Economic Zones World to support this activity (refinancing) and we are not looking for any support from the government,” he said.
Ratings agency Moody’s said earlier on Tuesday that Dubai, which has refinanced some $41 billion in debt related to Dubai World, faces refinancing risks related to three state-linked entities next year, including JAFZA. Peer Standard & Poor’s has named the JAFZA issue as among Dubai state-linked obligations in 2012 with the greatest chance of encountering repayment issues.
A source familiar with the matter said Dubai’s sovereign wealth fund may use funds it has raised to help repay some of the debt due from JAFZA and DIFC Investments, which has a $1.25 billion bond due next year.
The free zone, located on the outskirts of Dubai along the main highway connecting the city with neighbouring Abu Dhabi, does not have large tangible assets it could sell, with much of its asset base made up of investment properties and concession rights.
JAFZA made a profit of 139.7 million dirhams ($38.04 million) in 2010, its financial statements showed, compared with 286.7 million dirhams in the previous year.
Shirawi said JAFZA’s main activities were now back on track, contributing to almost 25 percent of the emirate’s real gross domestic product.
($1 = 3.6730 UAE dirhams) (Reporting by Praveen Menon and Martina Fuchs, editing by Sitaraman Shankar)