By Gavin Davids
Bank of America Merrill Lynch says state-backed developer needs funding solution to survive
Abu Dhabi-owned Aldar Properties will need AED9.8bn ($2.67bn) by 2011 if it is to survive, a report by Bank of America Merrill Lynch has said.
The property developer, which has a critical funding problem, is expected to refinance $816.8m of debt by the end of the year, the bank said.
According to Cairo bank EFG Hermes, Aldar is estimated to have $3.81bn in debt maturing in 2011 and will face a funding gap of nearly $1.66bn until the end of next year.
In the report, the bank said that it was sceptical about the terms of a new financing solution, which is expected in December.
It said: “Aldar could surprise on the upside if it received an explicit sovereign guaranteed issuance in the current easier credit market. Issue size would be critical to share price performance.”
An explicit undertaking of government support would be needed to review the valuation, the bank said.
The developer has seen its share price fall by 51 percent since March 28, as fears rose about minority investors suffering if government support proves to be dilutive. The resignation of its chief executive earlier this month has done little to quell negative sentiment around the stock.