x Abu Dhabi, UAEMonday 22 January 2018

Al Jaber Group seeks Dh6bn debt restructuring

Banks scramble to assess their exposure after Al Jaber Group announces it is seeking to alter the terms of its debts.

The Al Jaber Group is seeking to restructure debts of up to Dh6 billion (US$1.63bn) and has appointed KPMG as a financial adviser as negotiations with creditors begin, according to bankers close to the talks.

One banker said the family-owned conglomerate would seek a standstill on payments ahead of trying to restructure its debts, said to be caused by a "mismatch" between payments and receivables.

The effect of the downturn in the UAE's property market on Al Jaber Group's construction activities was said to be one reason for the conglomerate's troubles.

The next step would be forming a steering committee to ensure that the debt was restructured "equitably", with the delay on debt repayments likely to be the biggest issue, the banker said.

An executive whose bank has some exposure to Al Jaber Group said the deal was being looked at carefully.

Al Jaber was "a very important player in the industry of Abu Dhabi", he said, suggesting the impact of the restructuring could be felt throughout the emirate's economy.

In light of the announcement on Sunday by the conglomerate, previously thought to be among Abu Dhabi's strongest private-sector companies, UAE banks are trying to determine whether new provisioning is needed.

Jaap Meijer, a financial analyst at Alembic HC Securities, said making comparisons was difficult, but that if restructurings at Dubai World and Dubai Holding were used as a model, banks "might see 10 to 15 per cent provisioning on their exposure, if they reduce the interest rates and extend maturities".

Lenders with exposure include Emirates NBD, Mashreqbank and Abu Dhabi Islamic Bank, all of which declined to comment.

Al Jaber Group has Dh1.39bn of loans maturing next year, according to Bloomberg data, with Dh1.46bn due in 2013. The total debt said to be under negotiation exceeds what was previously announced by the conglomerate.

National Bank of Abu Dhabi and Al Hilal Bank may also have some exposure as the result of a $42m deal with Al Jaber Aviation in November last year to finance the purchase of two Embraer Legacy 600 private jets.