Mubadala converts Dh2bn bonds into Aldar stake

Mubadala Development announces it will convert $517m worth of bonds in Aldar Properties, sending the property developer's shares to their lowest ever value.

Mubadala Development has converted Dh2.1 billion (US$571.7 million) worth of bonds into shares in Aldar Properties, sending the Abu Dhabi property developer's shares to their lowest since their 2005 listing.

The strategic investment company owned by the Abu Dhabi Government converted bonds bought in March for 1.2 billion Aldar shares, taking its total stake to 49 per cent. Aldar posted a loss last year of Dh12.6bn, leading to issuance of Dh2.8bn of convertible bonds to Mubadala in March as part of a Dh19.2bn capital injection.

The latest announcement was part of "ongoing support as a long-term investor in Aldar", a spokesman for Mubadala said.

Mubadala's bonds were converted at a strike price of Dh1.75, almost double their current value.

Aldar's shares fell 4.1 per cent after the announcement to 92 fils each, their lowest level since the company's initial public offering.

The wider Abu Dhabi Securities Exchange General Index fell 1.2 per cent to 2,413.24, after the UAE failed to secure an upgrade to "emerging-market" status from MSCI, the index provider.Aldar received a huge capital injection from the Abu Dhabi Government and Mubadala earlier this year after mounting debts threatened to overwhelm the developer, in the wake of a plunge in property prices in the capital.

As part of an agreement approved by the company's board in January, Aldar agreed to transfer a number of assets to the Abu Dhabi Government, selling the emirate's flagship Ferrari World theme park alongside properties, land and infrastructure for a total of Dh16.4bn.

Since the sale of convertible bonds to Mubadala, Aldar's board has elected as chairman Ali Eid Al Mehairi, a former head of a Mubadala infrastructure unit.

Mr Al Mehairi's election in April was followed by the appointment of Greg Fewer as chief financial officer in October. Mr Fewer had been deputy head of Mubadala's structured finance and capital markets unit.

The capital injection is the first of two planned bond conversions by Mubadala as part of a capital injection signed in March, with a second conversion planned by the end of 2013 to grant Mubadala a controlling stake in Aldar.

But Mubadala would be wary of converting the remaining bonds until Aldar's performance improves, said Ankur Khetawat, a property analyst at HC Securities.

"Mubadala would like to wait until the company is in the black, because right now it's turning around," he said.