Dubai Holding repays $653mn in bonds, loans

NOT MERELY GRATUITOUS: Dubai Holding has a major stake in Daimler which makes Mercedes vehicles. (Getty Images)

Dubai Holding, a firm owned by the ruler of the Gulf Arab emirate, said on Wednesday it had repaid 2.4 billion dirhams ($653.4 million) of debt amid attempts by Dubai to reassure investors it can meet its obligations. Dubai Holding Commercial Operations Group, which runs the company's telecommunications, real estate, infrastructure and tourism investments, said it had repaid 1 billion dirhams in eurobonds maturing in November and 1.4 billion dirhams in outstanding bank loans. HSBC Middle East credit analyst Chavan Bhogaita said the debt payment was a good sign.

"We see the announced repayment of $653 million in eurobonds and loans as being credit positive," he said in an emailed note. "It confirms our view that Dubai Holding generates decent cash flows and is one of the stronger Dubai Inc names that have been oversold in the current market."

Dubai Holding's plans were announced a day after the investment arm of the Dubai International Financial Centre (DIFC) told Reuters it would repay a $500 million loan that matures in December. "Unless there is appetite for the new rate we will close it. We are under no pressure and will end up repaying the $500 million for SmartStream and staying in the market to see what happens," DIFC Investments Managing Director Bisher Barazi said on Tuesday.

The DIFC is seeking better terms for a new $350 million loan that would have been used to partly refinance its original loan. Mohammed Ali Alabbar, chairman of the Gulf emirate's top economic body, said on Monday that Dubai's sovereign debt stands at $10 billion while debts of state-affiliated firms amount to $70 billion and the government can meet those obligations.

"Five-year Dubai Holding CDS trading around 1000 basis points is unjustified in our view, and provides investors with a good opportunity," Bhogaita said. Dubai has borrowed widely regionally and internationally to fuel a real estate boom, but a tightening of mortgage lending, freezing of liquidity and a correction in the property market has raised questions on its ability to come good on its debt. (Reuters)

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