x Abu Dhabi, UAEThursday 27 July 2017

Dubai Aerospace and lenders reach debt deal

DAE signs a four-year credit facility with lenders, without disclosing the loan terms or size.

Dubai Aerospace Enterprise (DAE) has reached agreement with lenders for a new four-year credit facility as it faced US$800 million (Dh2.94 billion) in loans coming due this week.

The agreement provides a lifeline to the company, which is dramatically scaling back its aircraft leasing business after its ambitious growth plans were soured by the global financial downturn.

DAE employs 4,000 people, primarily through its aviation engineering and maintenance divisions based in Arizona, as well as some corporate staff based at the Dubai International Financial Centre.

Yesterday, DAE did not state the size of the credit facility or any other terms. The company has "successfully concluded discussions with its existing lenders and reached agreement on a new, four-year credit facility to replace the existing credit facility maturing on 23 July", it said.

Citigroup, Deutsche Bank, Emirates NBD and Lloyds were bookrunners for the existing $800m loans, maturing this week, with Noor Islamic Bank serving as the mandated arranger, according to Thomson Reuters data.

The move comes as UAE firms have sought to refinance debt terms and ride out the economic malaise while others have opted to delay bond issuances because of adverse market conditions.

"The DAE refinancing appears in line with a string of other debt instrument rollovers of Dubai corporates linked to the Government of the emirate of Dubai," said Martin Kohlhase, a regional vice president of corporate finance at Moody's.

"Key features are that the agreement is with its existing lenders and that a facility has been termed out. Nevertheless, questions about the capacity of the Government of Dubai to support any of its corporate entities remain if these entities are unable to refinance themselves in the capital markets," he said.

Financial institutions and investors have begun to open up lending to certain firms depending on certain criteria, said Bashar Al Natoor, a director at Fitch Ratings in Dubai.

"Financing and refinancing continues to be challenging in the UAE," he said. "However, there is differentiation between specific corporates and specific sectors, based on credit worthiness and performance."

Several UAE firms have delayed bond sales, including the UAE mall developer Majid Al Futtaim Holding and Abu Dhabi's Tourism Development Investment Company (TDIC).

Last week, a JPMorgan research note also said the state-backed Dubai Holding Commercial Operations Group may sell its entire telecommunications portfolio valued at $2bn to repay debt, including stakes in Tunisie Telecom, and du, which is based in the UAE. However, Emirates Airline successfully concluded a bond sale last month that raised $1bn from investors in Asia, Europe and the UAE.

DAE's struggling leasing division made headlines this month when Boeing and Airbus revealed the Dubai firm had cancelled orders for 80 aircraft, worth $8.6bn at list prices.

It was the latest in a string of order cancellations over the past 12 months, as DAE effectively erased all of its commitments made in 2007 for more than 200 new aircraft, worth almost $40bn. The company's leasing division still remains a customer with Boeing for 15 747-8 freighters, and six long-range 777s, some of which are expected to be operated by Emirates.

DAE's total publicly disclosed debt is about $2.7bn, according to Bloomberg News figures. The company's state-backed shareholders include the Investment Corporation of Dubai, Dubai International Capital, DIFC Investments, Emaar, Istithmar World and Dubai Silicon Oasis.