Tabreed bonds show investors bet on support

20/01/2011 00:00 AST

Islamic bonds of National Central Cooling Company, known as Tabreed, rose on speculation the provider of air conditioning services to the Dubai Metro may follow Aldar Properties PJSC in getting financial support from Abu Dhabi.

Tabreed’s floating-rate $200 million sukuk maturing in July rose 13 cents on the dollar in the past month to 88 cents on Tuesday, according to Exotix Ltd, an investment bank specialising in illiquid bonds.

Shares of Tabreed, part-owned by Mubadala Development Co, fell to an eight-year low on January 17 on concern government aid may dilute the stock.

“If Tabreed is not able to restructure, the support will be in another wave of convertibles,” Mahdi Mattar, head of research at Abu Dhabi-based CAPM Investment PJSC, an investment banking company, said in a response to e-mailed questions on Tuesday. “Investors learned from the Aldar case, that government support won’t be free.”

Aldar, 19 per cent owned by government-investment arm Mubadala, agreed on January 13 to sell assets and convertible bonds for Dh19.2 billion ($5.2 billion) to Abu Dhabi. Tabreed is talking to banks to restructure Dh5 billion of debt. The company has Dh4.72 billion of outstanding bonds and loans, according to data compiled by Bloomberg. That includes Dh3.55 billion due this year. The company may reach an accord with lenders within a month, two bankers said. Mubadala may buy convertible bonds from Tabreed according to the bankers involved in the negotiations, who declined to be identified because terms are still private.

‘Critical component’

Tabreed said in May it hadn’t made coupon payments on its Dh1.7 billion convertible Shariah-compliant bond after the board approved deferring payments under a recapitalisation plan. Shareholders that month gave the board the right to raise as much as Dh4.2 billion through debt and equity. Capital raising is a “critical component of the recapitalisation program,” Tabreed said on Tuesday in response to Bloomberg News questions. “No final decision has been taken on the amount or type of capital to be raised.”

“Mubadala continues to support Tabreed management in its recapitalisation programme and we will provide an update when appropriate,” Abu Dhabi-based Mubadala said in a statement in response to e-mailed questions on Tuesday. Abu Dhabi, holder of about seven per cent of the world’s oil reserves and capital of the UAE, plans to spend $500 billion on infrastructure and tourism by 2030 to diversify its economy and boost growth. The emirate and the country’s central bank lent neighoring Dubai $20 billion in 2009 as it struggled to repay debt of state-controlled companies, including Dubai World.

Sales of Islamic bonds from borrowers in the six-nation Gulf Cooperation Council, which includes the UAE and Saudi Arabia, dropped 32 per cent to $4.5 billion in 2010, the lowest level since 2005. Global issuance fell 15 per cent to $17.1 billion in 2010.

Bloomberg