x Abu Dhabi, UAE Friday 21 July 2017

Dubai Holdings repay Dh2.4bn in loans

The government-owned property developer and hotel operator says the payment "highlights that the company continues to operate from a position of strength".

The Dubai Holding Commercial Operations Group (DHOG) has repaid Dh1 billion (US$272.2 million) in publicly traded eurobonds using internal capital, the company announced on Wednesday. The property developer and hotel operator also recently repaid Dh1.4bn of bank loans, saying the payment "highlights that the company continues to operate from a position of strength". The announcement comes at a time when international and domestic sources of funding are scarce, leading analysts to question whether companies will be able to roll over large amounts of debt coming due in the next few months. The dirham-denominated bonds were issued to international investors last year in an effort to broaden the company's sources of funding. According to Mushtaq Khan, an economist at Citigroup, it made sense for DHOG to broadcast the fact it has paid the debt, given the concerns that have been circulating about the financial strength of Dubai companies. "These are very special circumstances. I think the announcement is quite justified," he said. DHOG is a part of Dubai Holding, which is 97.4 per cent owned by Sheikh Mohammed bin Rashid, Vice President of the UAE and Ruler of Dubai. Analysts have predicted that Dubai Holding and its subsidiaries would receive government aid should they face financing troubles, even though no formal guarantees from the Government are in place. The company owns the Burj Al Arab hotel through its subsidiary, Jumeirah, which accounted for 16.4 per cent of its revenue last year, according to the ratings company Standard and Poor's. Given the difficult conditions in global finance, other companies are also looking to internal funding sources, rather than borrowing at high rates on the international debt market. On Tuesday, DIFC Investments announced that it was effectively withdrawing a $350m syndicated loan launched last week, describing the terms offered by banks as "lavish". According to Bisher Barazi, the managing director at DIFC Investments, the company would offer the loan on terms it thought more reasonable. If there was no appetite for that, Mr Barazi said the company could raise the money from "internal resources". Earlier this week, Mohammed Ali Alabbar, a member of the Dubai Executive Council, said Dubai's government-related companies owed a total of $70bn. The debt was balanced by government assets of $90bn and assets belonging to state-backed companies of $260bn, he said. tpantin@thenational.ae