Tabreed reaches a debt restructuring deal and announces healthy annual profits after feeling the brunt of the financial crisis and the property-market downturn.
Tabreed share price leaps on debt plan
Tabreed stock surged yesterday after the Abu Dhabi-based district cooling company agreed to a Dh4.5 billion (US$1.22bn) debt refinancing plan and returned to profit. The company suffered more than Dh1bn in losses in 2009.
Like other district cooling operators in the UAE, Tabreed was thrown into distress by the property downturn that started in late 2008. It spent billions of dirhams building airconditioning plants, but revenues slowed as projects were delayed and scaled back.
"Today's announcement is significant not only because of the strong full-year unaudited results for 2010, but also because the approval of the terms of the refinancing by our bank lenders is a decisive step towards the successful recapitalisation of Tabreed," said Khaled al Qubaisi, Tabreed's managing director.
The company announced annual profits of Dh136.8 million.
As part of the restructuring, about Dh2.63bn of bank debt is to be consolidated and Tabreed is to be given more time to repay. Banks are also providing a Dh150m revolving loan to the company.
Mubadala Development, which owns about 11 per cent of Tabreed, will extend an additional Dh400m bridge loan to Tabreed to help to keep its business humming. Mubadala, a strategic investment company owned by the Abu Dhabi Government, already provided a Dh1.3bn bridge loan last year. In addition to its bank debt and Mubadala's bridge loans, Tabreed has a Dh1.7bn Islamic bond that converts into shares in May and $200m of Islamic debt due in July.
Talks over Tabreed's restructuring and recapitalisation started early last year, when its board sought approval from shareholders to seek new terms on debt. Tabreed is listed on the Abu Dhabi Securities Exchange.
The negotiations between Tabreed and its lenders, which include HSBC, Standard Chartered, First Gulf Bank and Al Hilal bank, were complex because of the involvement of Mubadala and the tangled nature of the company's finances, according to a source involved in the discussions.
Empower, a district cooling company owned by the Dubai Electricity and Water Authority, also underwent a debt restructuring in the wake of the crisis.
Investors reacted positively to Tabreed's profits and restructuring plan. The stock gained 6.5 per cent to close at Dh1.47.
Despite financial trouble at Tabreed and other cooling companies in the UAE that generate chilled air at plants and pump it through pipes into buildings, analysts say the model is still viable in the Gulf's hot climate.
"District cooling as a concept is not flawed and is the right answer to the growing energy costs and government initiatives towards sustainable development," analysts at Frost & Sullivan told The National last October. "If there is anything that needs a change at the moment, it will be the financing models."