Fitch upgrades ratings of Dubai free zone firm

Property group Jebel Ali Free Zone's credit metrics to improve further over next two years, says ratings agency

Fitch Ratings on Tuesday upgraded UAE-based property group Jebel Ali Free Zone (JAFZ) on the back of improved sentiment of the Dubai real estate market.

Its long-term issuer default rating was upgraded to 'BB-' from 'B+', with a stable outlook.

Fitch said the upgrade reflects JAFZ's improved liquidity profile and leverage metrics, on the back of stronger-than-expected operating performance and reduced leverage metrics.

This was supported by the disposal of EZW Gazeley, by the prepayment of debt, and by a reduction of the interest payable on its term loan, Fitch said in a statement.

Fitch added that it believes that JAFZ's credit metrics will continue improving in the next two years, supported by stable operating performance and the improved liquidity position.

JAFZ's revenue was AED1.53bn in 2013, up seven percent year-on-year with the improvement backed by improved economic sentiment in the Dubai market and increased occupancy rates.

JAFZ has historically maintained stable rental revenues and EBITDA margins at around 75 percent, backed by a fairly stable business model.

Fitch said it expects profitability and revenue growth to normalise at historical averages as the economy starts cooling down.

JAFZ's activities are important to Dubai's economy - the companies based in the free zone account for approximately 20 percent of GDP, and represent a key driver of the development of trade and transport.

Fitch said: "JAFZ's business tends to be less volatile and sensitive to asset bubbles than the broader Dubai office market. Its performance is correlated to the general level of economic activity in Dubai, which is itself dependent on the health of the regional and global economies as well as regional political stability."

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