Abu Dhabi's Tourism Development and Investment Company (TDIC) plans to tap capital markets this year to help fund a portfolio of projects worth Dh100 billion, an executive from the company said yesterday. The projects, such as the hotel and museum ventures on Saadiyat Island and Al Bateen Wharf on Abu Dhabi Island, are central to the capital's 2030 plan to triple the population of the emirate and evolve into a leading cultural destination.
"This year, part of this strategy will be to access the capital markets for longer-dated debt to match the maturity profile of our projects," said Mubarak al Muhairi, the managing director of TDIC. As a first step towards this strategy, Moody's Investors Service yesterday assigned the TDIC a Aa2 long-term local and foreign currency issuer rating. The ratings agency said the TDIC had a stable outlook.
"The Aa2 rating takes into account the benefits TDIC derives from its very close links to the Government of Abu Dhabi, such as 100 per cent government ownership, the public policy mandate and board representation and the Government's support as evidenced by land transfers as well as the absence of a profit-maximising motivation for certain projects with a socio-cultural aspect," said Martin Kohlhase, an assistant vice president at Moody's Dubai.
He said the company's underlying business would rely on government subsidies and funding as well as third-party external debt instruments to meet its funding gap. "The high support firmly expects that the Government will meet any exceptional requirements should TDIC not be able to secure funding needs from financial markets." The plans to raise debt come at a time of almost unprecedented stress in international capital markets. Several Dubai government entities have struggled to meet refinancing targets over the past few months because of falling confidence in lending markets worldwide.
Mr al Muhairi said TDIC's rating was part of an attempt by the company to diversify its capital base. He declined to specify how much leverage the company would seek. There would be significant funding requirements for the company to carry out its projects, which were expected to be largely met by third-party debt, land sales and government subsidies and funding, the Moody's report said. "Leverage is expected to peak in 2010, but should subside thereafter when developed residential units will be sold," said the report.
Mr al Muhairi said the rating would reassure investors during the economic crisis. "These ratings... support TDIC's creditworthiness to investors, lenders and other market participants," he said. "We are delighted that Abu Dhabi is being projected as a safe and transparent place to invest during difficult economic times." The majority of the TDIC's project portfolio spans the redevelopment of urban landmark districts, new-build mixed-use complexes, central city business and leisure resorts and desert resorts. The company's portfolio includes iconic projects such as the transformation of Saadiyat Island, which is expected to house 160,000 residents once its completed in 2018. The island will also be the location of the Louvre Abu Dhabi, Guggenheim Abu Dhabi Museum and the Sheikh Zayed National Museum, which are part of Abu Dhabi's five-year plan to attract 2.7 million tourists by 2012.