Dubai World unit mulls sale of UK asset as debts loom

Economic Zones World eyes sale of warehouse developer to pay down over $2bn debt
Dubai World unit mulls sale of UK asset as debts loom
EZW has more than $2bn in debt to pay down (Image for illustrative purposes only)
By Reuters
Mon 16 Jan 2012 07:50 AM

Economic Zones World (EZW), a unit of Dubai World, is
considering the sale of its UK-based warehouse property developer Gazeley, as
it looks to repay some of its debt of over $2bn this year, three banking
sources said.

Gazeley is one of the four businesses held by EZW, which
operates technology, logistics and industrial parks as well as Jebel Ali Free
Zone (JAFZA) under the Dubai World Group umbrella.

A potential sale of Gazeley will help EZW repay a portion of
debt maturing at JAFZA, the sources said, speaking on condition of anonymity.

JAFZA is aiming to refinance a $2.04bn Islamic bond maturing
in November this year. The firm has hired investment bank Rothschild for that
process, two of the sources said.

Dubai World bought Gazeley from Wal-Mart Stores in 2008 for
an estimated £300m to £400m ($459-611m) but a likely sale could only happen at
a discount due to the current economic climate and lack of buyers, two sources
said.

"They [EZW] have earmarked it for sale. Banks are
chasing that mandate but don't think they have officially named anyone,"
one of the sources said.

"Gazeley is a mediocre asset. They will be lucky to
generate the purchase price on it given the current market conditions," he
added.

Gazeley has so far developed around 6.4 million sq m of
warehousing, according to the company's website.

EZW declined to comment on the matter.

Its chairman Hisham Abdullah al-Shirawi said last month that
he does not rule out asset sales to help raise funds to pay off JAFZA's debt
but said the company does not need to seek government support.

Ratings agency Moody's said last month that Dubai, which has
restructured some $41bn in debt related to Dubai World, faces refinancing risks
related to three state-linked entities next year, including JAFZA.

Rival ratings firm Standard & Poor's has named the JAFZA
bond maturity as among Dubai state-linked obligations in 2012 with the greatest
chance of encountering repayment issues
.

Dubai stunned global markets in November 2009 when it sought
a standstill on $26bn in debts related to Dubai World. It struck a deal with
banks last year, promising full repayment on the principal in five to eight
years.

Discussions in government circles focus on $3.8bn in bonds
due in 2012 from a trio of state-linked firms, including JAFZA. The other two
firms are Dubai Holding Commercial Operations Group (DHCOG), part of the
ruler's private holding company and DIFC Investments (DIFCI).

However, Dubai has said it has no plans to restructure debt
held by state-linked companies, although it is ready to support them through
"various" refinancing options.

The Gulf Arab emirate is slowly recovering from the depths
of its debt crisis, helped by an economic revival in trade and tourism and its
safe-haven status amid the Arab Spring civil uprisings.

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