Gulf emirate will see nearly $14bn of liabilities linked to state firms mature in 2012
Dubai's government-related entities (GREs) can pay down or
refinance nearly $14bn in debt maturing next year with relative ease, a report
by investment bank JP Morgan said on Thursday.
The emirate's capital market risk is limited primarily to
Jebel Ali Free Zone (JAFZA), a unit of state-owned conglomerate Dubai World
that is looking to refinance its AED7.5bn ($2.04bn) Islamic bond, and the
topping up needs of the Dubai Financial Support Fund (DFSF), which are about
$2.5bn to $3.5bn.
"The $14bn wall of debt maturities at Dubai GREs next
year is not nearly as daunting as the headline number suggests," analyst
Zafar Nazim said in a report dated Oct 12.
However, the report expressed concerns about the
yet-to-be-concluded state-linked restructurings as they could lead to
repercussions such as negative headlines, litigation and the burden of financial
support on the government.
Dubai Group, part of a conglomerate owned by the emirate's
ruler, may take longer than expected to reach an agreement with its lenders on
a $10bn debt deal, a senior banker involved in the talks said earlier this
The report also said that state-owned entities Dubai Holding
Commercial Operations, DIFC Investments and JAFZA are focused on next year's
bond maturities without any support from the DFSF.
"These entities expect to meet bond maturities via a
combination of operating cash generation, asset sales and refinancing.
Accessing DFSF appears to be more of a Plan B," said the report.
Only $3.3bn of debt maturities - relating to JAFZA and DIFC
- could be considered challenging. The remaining roughly $10bn of debt for next
year is at entities that have healthy balance sheets and cash generation, the
Meanwhile, the government's property arm Nakheel , which
recently completed its $16bn restructuring, is expected to see an injection of
$1.5b to $2bn over the June 2011 to December 2012 period.
Dubai has been in the spotlight for its debt woes since late
2009, as it struggled to rebuild investor confidence since state-owned Dubai
World announced a $26bn restructuring.