Dubai International Capital (DIC), the private equity arm of Dubai Holding, is confident that it will pay off its $2.5bn pile of restructured debt in five years, its chief executive said, seeking to reassure investors.
The company aims to raise more than $150m from asset sales this year, including a partial exit from luxury retailer Rivoli, which it will use to help pay down debt.
“We’re 100 percent confident that we’ll meet our commitments and we wouldn’t have proposed this solution if we weren’t confident. The last thing anybody wants is a restructuring of a restructuring,” David Smoot told Reuters in an interview.
Dubai Holding, the investment conglomerate owned by the emirate’s ruler, said last week that Dubai International Capital has reached an agreement with creditors to restructure $2.5bn of debt, ending nearly two years of talks.
The debt agreement marks another milestone in Dubai’s effort to rebuild its credibility with investors who fled the region after state-owned conglomerate Dubai World shook markets in 2009 with plans for a $25bn debt restructuring.
DIC, which has stakes in British-based budget hotel chain Travelodge and German alumina products maker Almatis, was hard hit during the 2008/9 financial crisis.
“We didn’t need the government support. The restructuring was all done on a commercial basis,” Smoot said, adding that the company has paid all the interest that was due on the debt.
Aside from the restructured debt, DIC has paid off around $225m in loans and expects to be able to pay down additional debt in 2012, he said.
DIC, which sold hotel operator Ishraq Dubai to diversified firm Almulla Group in October last year and exited its 45 percent stake in valve maker KEF Holdings Inc, plans to partially exit luxury retailer Rivoli and a few other assets in the coming 12 months, Smoot said.
“Right now the big asset is Rivoli, we own close to 40 percent. We might do a partial divestment over the next 12 months,” he said.
“We will be able to sell between now and the end of the year at least $150m worth of assets in the Middle East. We take this much off the table this year and we’ll be left with almost the same amount in potential asset sales,” he said.
“At the moment, our Middle East portfolio is performing exceptionally well and the interest in our assets is very high.”
Other major state-owned Dubai entities have reached restructuring agreements with creditors by extending debt agreements and promising repayments mainly through asset sales. But volatile market conditions have meant few high-profile assets have actually been put up for sale.
DIC currently holds less than 9 percent in hedge fund firm Och-Ziff Capital Management Group, which it plans to keep for now.
“We have no plans to exit the stock. We’re very patient. If an asset is undervalued and there’s a room to grow, why would you sell it?” Smoot said, adding that there were no plans to sell other international investments, either.
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