Aldar Properties has refinanced Dh1.8 billion of debt as Abu Dhabi’s largest developer seeks to reduce its interest burden.
The company said that it had completed the refinancing for a portfolio of existing bank loans due to mature by 2018 with three banks on interest-only terms for loan lengths of five, seven and 10 years.
The developer, which is 29.75 per cent owned by Abu Dhabi government fund Mubadala, said the deals meant that the average length of its bank loans was now about four years.
“Aldar’s ability to secure interest-only bank loans with maturities of up to 10 years at highly competitive commercial terms underlines Aldar’s robust performance, clear strategy and future prospects,” the company said.
The news came as ratings agency Standard & Poor’s announced that it had upgraded the group’s long and short-term corporate credit ratings. It said the rating upgrade to BBB/A-2 with a stable outlook from BBB/A-3 was on the back of a hike in the company’s income from recurring revenue since it opened Abu Dhabi’s largest shopping centre, Yas Mall, a year and a half ago.
“Aldar continues to improve its operating performance on the back of steady recurring income from its rental portfolio, which has strengthened our view of its financial and business risk profiles,” S&P said in a note. “At the same time we believe Aldar will focus more on its commercial operations as its public policy role diminishes.”
It also said that it would not be raising its rating by two notches as it had done in 2013 based on improvements in Aldar’s balance sheet because it said that the chances of the Abu Dhabi government bailing Aldar out again if it hit financial difficulties had “significantly reduced”.
“While we consider Aldar to be a government-related entity, the amount of government projects to be undertaken by Aldar has significantly reduced,” S&P said. “Although we continue to see Aldar as a vehicle for the government with potential for future government transactions, we believe the company’s public policy role has diminished.”
According to Aldar’s most recent quarterly results, the company had a total of Dh5.9bn worth of debt on its balance sheet at the end of June.
That situation is a far cry from the dark days following the global financial crisis when the company overextended itself and total debts mushroomed to Dh38.6bn at the end of 2009 and the company looked in danger of going bust.
In those years the company was forced to pay sky-high interest rates of as much as 10.75 per cent on some of its bonds.
But in the seven years since the crisis, Aldar has worked hard to rebuild its balance sheet with three large asset sales to the Abu Dhabi government and a merger with rival Abu Dhabi property developer Sorouh.
The company has also built up a rental portfolio of shops, flats and offices, including Yas Mall, in an attempt to reduce its exposure to the peaks and troughs of the capital’s volatile property market.
“This ratings action is another acknowledgement of our financial strength and the success we have enjoyed in building a mature and sustainable business,” said Mohamed Khalifa Al Mubarak, Aldar’s chief executive.
Earlier this month, Aldar reported that second-quarter net profit rose by about 10 per cent to Dh657.3 million despite a slowdown in the Abu Dhabi property market.
Aldar shares fell by 1.04 per cent in trading to close at Dh2.85.
lbarnard@thenational.ae