Dubai, which teetered on the brink of default in 2009, is accelerating asset sales as more than $30bn of debt repayments come due next year.
Dubai Financial Group on Sunday agreed to sell its stake in consumer lender Dubai First to First Gulf Bank for 601mn dirhams ($163mn). Dubai Holding plans to sell its 35% stake in Tunisie Telecom, the country’s ministry for information and communication technologies, said June 21.
The second largest of the seven emirates that comprise the UAE, Dubai is seeking to take advantage of a rebounding economy to regain investor confidence after its near default on $25bn of debt roiled markets almost four years ago. State-owned companies such as Dubai Holding and Dubai World borrowed billions in a spending binge intended to make the city a trade and tourism hub of the Middle East.
“Government entities are accelerating the pace of asset sales to meet upcoming debt,” Montasser Khelifi, a senior manager for global markets at Quantum Investment Bank in the city, wrote in e-mailed comments. “They’re trying to anticipate maturities as market conditions have been good. We’ve seen a surge in M&A activity both regionally and globally.”
The emirate’s state-linked debt coming due totals about $32bn next year and $9.6bn in 2015, according to Bank of America Merrill Lynch. Abu Dhabi, Dubai’s larger neighbour, probably won’t provide direct support next year after rescuing Dubai from the crash with a $20bn lifeline, Moody’s Investors Service said in a March report.
After almost four years of financial crisis, Dubai’s economic recovery has quickened with a rebound in tourism, trade and property. The economy will grow 4% this year, according to the International Monetary Fund, while the Dubai Financial Market General Index has risen 39% in 2013. The benchmark fell as much as 5.1% yesterday before paring losses to close 1.9% lower amid an emerging-market rout after China signalled it will maintain efforts to curb credit.
MSCI Inc, whose equity indexes are tracked by investors with about $7tn in assets, upgraded stock markets in Dubai and Abu Dhabi to emerging-market status this month. The average sale price of mid-range villas in the emirate soared 47% in the year to May, while mid-range apartment prices advanced 32%, according to data compiled by Cluttons.
The IMF estimates Dubai accumulated about $113bn of debt as it pursued projects that included the construction of the world’s tallest tower, palm-tree shaped residential and tourism islands in the sea, and a real estate binge that saw vast tracts of land reclaimed from the desert.
Dubai World, the state-owned entity whose inability to repay debt helped trigger the crisis, agreed to sell UK warehouse developer EZW Gazeley Ltd earlier this month. The company needs to repay $4.4bn to creditors in 2015 and a further $10.3bn by 2018, according to its repayment plan.
Dubai Group, which owns Dubai Financial Group, last month agreed on final terms for restructuring $6bn of bank debt. The Dubai First sale is “part of our stated plan to sell down assets in order to support our broader ongoing restructuring process,” Dubai Group chief executive officer Fadel al-Ali said on Sunday in an e-mailed statement.
Dubai Group unit Dubai Insurance Group in February sold a 41% stake in Oman National Investment Corp to Oman Investment Fund, the country’s sovereign wealth fund, for about $57mn. The company also holds stakes in Dubai-based investment bank Shuaa Capital, Cairo-based EFG-Hermes Holding and Bank Muscat, Oman’s biggest bank by assets.
Dubai faces a “pivotal year” in 2014 amid an unclear legal framework for restructurings and uncertain support from its richer neighbour, Moody’s said in the March report.
Earlier this month, Abu Dhabi’s Mubadala Development Co said it will buy a 50% stake in state-owned Dubai Aluminium Co and merge another aluminium smelter to create a $15bn joint venture. “We are seeing more consolidation of assets between Dubai and Abu Dhabi,” said Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital.
Reported by: Caye Global News, Gulf Times
Oil, Gas and Petrochemicals by Dr. Theodore, now available on these stores:
Oil – Gas Exploration & Drilling: