Dubai Sukuk to Fund Airport Expansion
Etihad Airways has bought a three percent stake in Irish airline Aer Lingus as a precursor to a commercial tie-up that could help Abu Dhabi's flagship carrier gain more European routes to catch up with Middle Eastern rivals
May 1, 2012 3:28 by kippreport
Dubai will employ $1.25 billion raised through an Islamic bond last week to fund the expansion of its airport and sees no risk to repaying creditors at its flagship conglomerate Dubai World on time, a top Dubai official told Reuters on Tuesday. “We will use proceeds from the $1.25 billion sukuk to fund Dubai International Airport expansion,” Sheikh Ahmed bin Saeed al Maktoum, a close advisor and uncle to Dubai’s ruler and a key figure in the emirate’s recovery from its 2009 debt debacle, said in an interview on the sidelines of a Dubai travel show.
The emirate is steadily recovering from a 2009 debt crisis which saw Dubai World stun global markets with plans to delay repayment on $25 billion of debt. The conglomerate reached a deal in 2010 to repay lenders over five and eight years. Other state-linked firms are in the midst of restructuring debt. “We (Dubai World) are committed to the plan set in 2010. Dubai World and its companies are making excellent revenues and we expect the debt to be paid on time. There’s no need to extend debt when it falls due,” said Sheikh Ahmed, who also heads the Supreme Fiscal Committee.
The emirate has been rehabilitating its reputation in the aftermath of the debt crisis, helped by a revival in trade and tourism and its safe-haven status amid the Arab Spring popular revolts. Dubai has long touted its position as travel hub and rapidly expanded its Emirates airline.
The carrier, among the top 10 in the world by passenger numbers, and top customer of Airbus’ A380 superjumbo, expects 2011 profits to be better than those in 2010 despite higher fuel costs, Sheikh Ahmed said. Fuel costs were about $2 billion last year, accounting for 40 to 43 percent of the airline’s costs, he added. The airline has a $500 million bond maturing in June. “The Emirates cash reserve is good. It’s excellent, I must say. We have 4 billion dirhams in cash so we are capable of paying off the debt in June, but we’re still weighing options,” the airline’s chairman said.
(Writing by Amran Abocar; Editing by Shankar Sitaraman)