DUBAI: DIFC Investments, a unit of the company running Dubai's financial free zone, detailed plans to meet a looming $1.25 billion debt repayment that could help restore investor confidence shaken in Dubai's massive debt restructuring in 2009.
A top executive said DIFC will aim to sell non-core assets in future to raise cash, after the company earlier said it had secured a $1.04 billion loan to help repay the Islamic bond maturing later this month.
The bond maturing on June 13 was seen as one of the most challenging maturity for the emirate in 2012 and a timely repayment will help boost credibility among investors, who fled after state-owned Dubai World shook markets in 2009 with plans for a $25 billion debt restructuring.
The emirate has seen a slow recovery in its main revenue-generating businesses such as trade and tourism, but still has a sizeable debt pile to manage. Some state-linked entities are still negotiating debt agreements with creditors after the financial crisis led to a collapse in its property market.
DIFCI, whose assets range from aerospace to retail, said it raised the five-year syndicated Islamic loan facility priced at 380 basis points over the London Interbank Offered Rate (LIBOR).
The facility was mainly secured on the investment firm's property assets, a statement filed to the Nasdaq Dubai bourse showed. The remaining portion of the Islamic bond will be repaid by cash raised from previous asset sales, Shahli Akram, the company's managing director, said.
"We will continue to divest our non-core assets going forward and the main focus will be on our cash generating activities," Akram said.
"The proceeds from the loan and the cash we have from previous sale of non-core assets will be used for the repayment of the bond," he added.
Emirates NBD, Dubai's largest lender, Standard Chartered, Dubai Islamic Bank and Noor Islamic Bank arranged the deal. Moelis & Co acted as financial advisor to DIFCI.
The loan has a shortfall guarantee from the Dubai government which covers nearly half the loan's amount, two sources told Reuters said. The statement did not mention the guarantee.
The sukuk, which traded down as much as low-60s on the dollar following the debt crisis in 2009, has been trading near par in recent weeks on investor hopes of a full repayment.
The sukuk, along with a $2 billion bond maturity at state-owned firm Jebel Ali Free Zone (JAFZA), has been in the spotlight as Dubai tries to tackle its debt maturities.
The glitzy emirate has never defaulted on its bond obligations and most of its restructuring deals have been secured by agreeing extended maturities with banks.
Dubai also raised $1.25 billion from a sovereign Islamic bond in April.
State-owned JAFZA picked seven banks to arrange a new Islamic bond, lead managers said on Friday, with at least $500 million likely to be raised to part-repay the firm's $2 billion sukuk obligation.
It has ruled out any need for government support to meet its debt obligation.
DIFC Investments made a net profit of $130.5 million last year, compared with a net loss of $272 million in the previous year, after the impact of discontinued operations.
Dubai's DIFCI details plans for $1.25bn bond repayment
