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Dubai’s JAFZA ’10 profit halves; bond to be refinanced

2010 profit 139.7 mln dirhams – statement; Looking at refinancing options for 7.5 bln dirham sukuk

April 18, 2011 3:36 by

Full-year profit at Jebel Ali Free Zone (JAFZA), a unit of state-owned conglomerate Dubai World more than halved, and the firm said it was eyeing options to refinance an Islamic bond due in 2012.

In a statement accompanying its financial results, JAFZA’s chairman said the company was considering refinancing options for its 7.5 billion dirham ($2.04 billion) Islamic bond, or sukuk, its only outstanding debt.

“The establishment commenced work on the liability management and is currently exploring various refinancing options,” Chairman Hisham Abdullah Al Shirawi said in a statement, referring to the sukuk.

The dirham-denominated sukuk is not guaranteed by the government of Dubai and bondholders are predominately local banks.

The free zone, located on the outskirts of Dubai along the main highway which connects the city with neighbouring Abu Dhabi, is owned by Dubai World, which earlier this year finalised an agreement with its lenders to restructure some $25 billion in debt.

Part of the agreement includes asset sales.

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.

Impairments of investment properties hit 198.3 million dirhams, weighing on profitability, against 28.4 million dirhams in 2009, the statement said.

Total impairments stood at 247 million dirhams.

The need to refinance debts among Dubai’s state-linked entities is expected with upcoming maturities totalling about $30 billion to 2012.

The emirate overstretched itself building palm-shaped islands and other large-scale projects financed with short-term loans.

But recent political instability across the region and returning investor confidence in Dubai has attracted buyers into Dubai bonds.

Yields on Dubai names, including the Jafza sukuk, have narrowed in the last few weeks, with growing buying interest in the bond. One Dubai-based fixed income trader said the market has already priced in the refinancing of the sukuk. (Reporting by Rachna Uppal; Editing by Dinesh Nair)

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