DP World, Dubai’s integrated logistics and technology company, has been upgraded by Moody’s Investors Service (Moody’s) – a significant statement of confidence in the company’s business and future.
Moody’s upgraded DP World Limited’s long-term issuer rating to Baa2 from Baa3. At the same time, the senior unsecured ratings assigned to the Medium-Term Note (MTN) Programs of DP World Limited and DP World Crescent Limited were upgraded to (P)Baa2 from (P)Baa3 and ratings of all outstanding rated senior unsecured bonds were also upgraded to Baa2 from Baa3.
The rating of the perpetual junior subordinated reset note issued by DP World Salaam was upgraded to Ba1 from Ba2. The outlook on all ratings remains stable.
Sultan Ahmed Bin Sulayem, Group Chairman and CEO of DP World, said: “Our improved rating by Moody’s shows the confidence global investors have in our business, our world-leading assets and our strategy to push deeper into the logistics business to capture more value.
“We have embarked on a strategic transformation journey that will enable us to better achieve our vision of creating end-to-end integrated global supply chain solutions from the factory floor to the customer’s door.”
Moody’s said DP World’s ratings were upgraded because the company has successfully reduced net debt to EBITDA (before IFRS leases) as of December 2022 below 4.0x, in line with the target that it announced at the time of its recapitalisation in 2020.
In 2020, Port and Free Zone World FZE (PFZW), DP World’s immediate parent, issued $9 billion of debt, guaranteed by DP World, to fund a $5.15 billion dividend to its ultimate parent Dubai World to redeem its legacy debt and to fund the repurchase of DP World’s 19.55 percent listed shares. As of 31 December 2022, the debt issued by PFZW has been fully repaid, mainly through proceeds of asset sales by DP World in June and December 2022.
Moody’s noted: “Following the reduction in debt, the company has re-established a solid financial profile and excellent liquidity that more appropriately position its ratings in the Baa2 category. Moody’s also recognises a strengthening in financial policy and management credibility as a result of adhering to the previously announced deleveraging target in a timely manner, which Moody’s includes as a governance consideration.”
DP World’s business
The Dubai port operators have benefited from the company’s diversified global port operations in strategic fast growing emerging market locations with long-term concessions and continued success of its Jebel Ali Port and Free Zone in Dubai, the fourth largest container port globally outside of China.
DP World’s business has had solid profitability through economic cycles and expected positive long-term growth in international container traffic, as the company focuses on origin and destination (O&D) cargo, which is relatively less sensitive to cyclical downturns than transshipment ports.
The fourth point that Moody’s highlighted is the prudent financial policy targeting net debt to EBITDA (before IFRS leases) of less than 4.0x.
DP World has also benefited from raising $7.4 billion last year from the sale of a 32.2 percent stake in three of its key assets – the Jebel Ali Port, the Jebel Ali Free Zone and the National Industries Park to Canadian fund Caisse de depot et placement du Quebec (CDPQ) and Hassana, a Saudi Arabian pension fund.
Moody’s positively noted the company’s strong operating performance throughout 2021 and 2022, which has further contributed to reducing leverage. It estimates adjusted gross debt to EBITDA to reach 4.3x by the end of 2022, down from 6.9x a year earlier and funds from operations (FFO) to debt to increase to around 17 percent from 10 percent a year earlier.
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