Dubai investment firm vows to repay $4B in debt

AP News
Posted: Aug 08, 2011 8:51 AM
Dubai investment firm vows to repay $4B in debt

A Dubai government conglomerate that controls some of the emirate's industrial powerhouses will repay in full $4 billion worth of debt coming due this month, the city-state vowed Monday in a move that could reassure investors worried about the strength of the world economy.

Investment Corporation of Dubai, whose holdings include the Middle East's biggest airline, Emirates, is widely seen as the healthiest of Dubai's three major state-linked conglomerates.

Its decision to pay off the debt was nonetheless unexpected and signals rising confidence in the city-state, said Zafar Nazim, senior Mideast credit analyst at JP Morgan in London. He said investors had been expecting ICD to pay just part of the loans and then roll over the rest.

"It sends a strong signal that these guys are able to repay debt from their internal sources and ... have less dependence on capital markets," he said.

Monday's announcement, issued by Dubai's government media office, comes as world markets are slumping following Standard & Poor's one-notch downgrade on Friday of the United States' credit rating.

Dubai is still recovering from the effects of the global financial crisis and the near-default of one of its key government-related conglomerates, Dubai World. Severe debt problems at that company sparked credit fears that sent world markets reeling in late 2009.

In a statement announcing the repayment plans, ICD's chief said his company has the resources and is committed to paying its debts.

"This substantial repayment is the result of our strong portfolio of diverse and successful companies across Dubai, as well as the underlying strength of our economy," said Mohammed al-Shaibani, the ICD executive director and CEO. "Dubai is witnessing a recovery and remains a stable financial center ... and has proven its resilience in recent times."

Besides Emirates and the airline's related businesses, ICD controls aluminum smelter Dubal, the Emirates National Oil Co., the Dubai World Trade Center real estate complex and stakes in several local banks.

It is also owns part of Emaar Properties, the developer of the world's tallest tower, and Borse Dubai, which runs the city-state's stock markets and holds a 20 percent stake in the London Stock Exchange.

"Most of the government's crown jewels are under ICD," said Nazim.

The government said ICD would repay the $2.5 billion in conventional debt and $1.5 billion in Islamic loans it owes by the Aug. 21 due date. It expects to cover the debts mainly using cash dividends generated from the company's operating units.

ICD has another $2 billion worth of debt from the same pile of loans that matures in 2013.