UAE capital from bonds a 'good sign'

Dubai: Capital raised from bonds recently issued by UAE companies would prove to be a positive sign of recovery for the country, a Moody's analyst said.

The country's large listed and government companies have recently issued bonds, while many others are under discussion.

National Marine Dredging Company, 40 per cent owned by Abu Dhabi National Oil Company said in March that it would issue Dh391.5 million in convertible bonds for a strategic partnership to increase its capital, at a conversion price of Dh7.83.

Aldar Properties PJSC, the Abu Dhabi-based developer, sold Dh4.5 billion of bonds, the first real estate company in the UAE to issue debt since August. It had initially planned to raise more than $500 million (Dh1.84 billion) in a bond offering.

Experts have recently been saying that bonds will be the rescue route for companies with tight cash flow and will prefer them to issuing initial public offerings.

Philip Lotter, senior vice-president of corporate finance in the Middle East for Moody's said: "The fact that they [companies] are able to raise money through bonds, will definitely be positive. It would show that the liquidity crisis is over and that would be a big positive."

Currently, ratings for all companies done by the agency have negative outlooks, which could change if their cash flow was more stable.

Given that most of Moody's corporate ratings in the GCC are for government-owned companies, the rating agency's assumption of a generally high likelihood of governmental support remains key to its ratings analysis.

Indeed, this assumption is holding up many Moody's ratings of GCC corporate in the face of deteriorating fundamental metrics.

"If the recovery continues and if the government remains supportive towards all of its companies, then that outlook can go back to stable," Lotter said.

DP World, the ports company, Dubai International Financial Centre Investment, Jebel Ali Free Zone and Dubai Electricity and Water Authority all have A1 rating while Dubai Holding Commercial Op Group has an A2 rating and Emaar Properties has a Baa1 rating.

The negative outlook on all issuers implies a 25 per cent to 50 per cent chance of further downgrades in the next 12 to 18 months, Lotter said, adding that government support of these entities would be the "key driver" for rating.