Board makes no move on refinancing or new investment
Aabar share price declines but mood remains buoyant
Aabar Investments stock fell to its lowest level this year after the company said its board of directors made no decisions on refinancing debts and making future investments. Shares in Aabar, which are listed on the Abu Dhabi Securities Exchange, fell by 5.2 per cent yesterday to Dh1.62, tracking a decline in prices in Abu Dhabi and Dubai. The stock has lost more than 21 per cent so far this year. Aabar is 71 per cent owned by the International Petroleum Investment Company (IPIC), which in turn is wholly owned by the Abu Dhabi Government. The remaining Aabar shares are publicly traded.
The board of directors called a meeting last Thursday to "consider refinancing opportunities for existing indebtedness of the company" and to weigh "future projects and investment opportunities", according to a statement posted on the Abu Dhabi bourse's website. Despite the board's failure to adopt any resolutions at the meeting and the ensuing stock price decline, Aabar is expected to have little trouble managing debts coming due this year or raising money for new investments. Its majority ownership by IPIC gives it strong ties with a government investment vehicle that has shown staunch support in the past. Just last month, Aabar announced that IPIC had extended Dh1.5 billion (US$408.3 million) to the company in the form of a bond that converts into Aabar shares.
The bond built on billions of dirhams injected by IPIC in the same manner over the past two years, helping Aabar grow from a small energy company into one of Abu Dhabi's most visible investment vehicles. The transformation saw Aabar acquire a 32 per cent stake in Richard Branson's space tourism venture Virgin Galactic last year, as well as part of Banco Santander's Brazilian subsidiary and financial-sector interests in Europe. Its largest move was the $2.7bn it paid for 9.1 per cent of Daimler, making it the German car giant's biggest shareholder.
The buying spree, fuelled by IPIC's bonds and borrowings from international banks and investors, led to a period of fast growth. Aabar's assets were worth Dh37.2bn at the end of last year, according to its financial statements, up from Dh3.2bn at the end of 2008. Government-owned entities in Abu Dhabi have come under pressure recently from credit ratings agencies as they change how they rate quasi-sovereign companies. Moody's Investors Service in March downgraded six companies either partially or fully owned by the Abu Dhabi Government, including IPIC. Aabar is not rated by any of the three main international agencies.
Credit ratings affect the interest rates companies and governments must pay when they borrow. But IPIC still has some of the highest ratings on Moody's scale and Aabar's ability to handle its debt load and secure refinancing at favourable terms does not appear to be in question. "I don't think they would have a problem getting anybody to finance a position," said Akram Annous, a fund manager at Al Mal Capital in Dubai. Aabar executives could not be reached for comment.