Debt woes resurface for UAE companies

Three corporations across the UAE are looking to refinance billions of dollars in loans accumulated during the boom years.

A fresh wave of debt troubles emerged across the Emirates yesterday as three corporations looked to refinance billions of dollars in loans accumulated during the boom.

Zabeel Investments, a holding company based in Dubai, is in talks to extend the repayment of about Dh6 billion (US$1.63bn) of debt, The National has learnt. Meanwhile Emarat, a Federal Government-owned fuel retailer, is retooling its business and trying to raise fresh cash, its chairman said.

The Abu Dhabi Government may also take a bigger stake in Aldar Properties, a major developer, as it grapples with more than Dh10bn of debt coming due this year.

"There's a lot of debt coming to maturity and that's going to get restructured," said Ahmad Alanani, the director of fixed income sales at Exotix in Dubai. "They have to restructure."

Companies across the UAE made strides last year towards financial stability after the global crisis forced some to ask for extensions on debt repayments.

Dubai World, a government conglomerate that owns the global ports operator DP World, last September reached an agreement with creditors to restructure $24.9bn of debt into new loans maturing in five and eight years. Divisions of Dubai Holding, a company owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai, also entered restructuring talks last year.

Riding the positive investor sentiment from Dubai World's restructuring, Dubai sold $1.25bn of government bonds in September.

Analysts said much hard work was still required, however, before companies in the UAE and across the Gulf could be given a clean bill of financial health.

Borrowers in the region face about $70bn of debt maturing this year, Nafees Akbarali, the regional head of fixed income at Standard Chartered, said yesterday. The coming debt restructuring and refinancing could force companies to pay higher rates of interest on new borrowings, he added.

"With significant debt maturities coming into the year and concerns over transparency for some GCC economies, risk premiums will build up and this will serve to push up borrowing costs," he told Bloomberg.

Renewed financial trouble may force companies to offer better terms to banks in their restructurings this year, Mr Alanani said. They may have to put up more collateral to back loans that are extended. He said he also expected companies to sell more assets to raise cash and repay debt.

"Something's got to give," he said. "We're going to have to see more asset sales this year and going into next year."

Markets reacted negatively to yesterday's news, with stocks listed on the Dubai Financial Market falling 1.52 per cent, the biggest decline in more than two months. Abu Dhabi's index fell by 0.53 per cent.