MAF Holding picks banks to sell hybrid bond to fund acquisition

Dubai: Majid Al Futtaim (MAF) Holding has picked five banks to arrange the sale of a dollar-denominated hybrid bond to fund the Dh2.5 billion (€530 million) acquisition of a 25 per cent stake in a joint venture from its partner Carrefour — the world’s second biggest retailer after Walmart.

The perpetual hybrid bond – which combines elements of both debt and equity – has been assigned ‘BB+’ rating by Standard & Poor’s while Fitch Ratings has affirmed MAF long-term issuer default rating at ‘BBB’, with a stable outlook.

“The notes will be issued on a subordinated basis by MAF Global Securities Limited and are constituted by a trust deed, made between the issuer, MAF Holding LLC and MAF Properties LLC,” Fitch Ratings said.

MAF has a large development pipeline, with potential development exposure of more than Dh21 billion in the coming five years.

Carrefour on Wednesday announced the sale of its 25 per cent stake in MAF Hypermarkets — which holds the regional franchise for Carrefour in the Middle East to its regional partner MAF Holding.

Gildas Aitamer, Retail Analyst at Planet Retail, said, the move was prompt by Carrefour’s need for cash to invest in its priority markets such as France, Brazil and China. “Given the minority share of Carrefour, the risk of the region, and the scope of the operation, I believe it is a fair deal for Carrefour. While CEO Georges Plassat announced divestment times were over earlier this year, it is a clear sign that Carrefour is not optimistic as of the turnaround of its current operations in the short term,” he told Gulf News.

Despite Carrefour’s stake sale, both partners have agreed to strengthen their partnership by extending the franchise agreement of Carrefour till 2025.

“MAF find its interests in a longer franchise agreement and more freedom concerning the countries and formats to operate in,” Aitamer said. “We could imagine the franchisee could be interesting in a more diversified approach than the current hypermarket tandem. For instance, Carrefour’s franchisee in Tunisia or Morocco operates not only those two formats but also convenience stores and cash & carries.

In its financial year 2012 the company’s net debt levels were down to Dh7 billion from Dh7.5 billion in 2011, mainly due to better than expected operational performance. MAF Holding strengthened its liquidity by proactively refinancing $1.5 billion of maturities of 2012 and in 2011.

“Nevertheless, the group still faces moderate refinancing risks over the next few years, with almost Dh1.9 billion maturing/amortising in 2013 and 2014 and the upcoming maturity of the 2014 undrawn revolving facility totalling Dh2.5 billion,” Fitch Ratings said in its assessment.