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| Sheikh Ahmed: Emirates cash reserve is good |
Dubai will use $1.25bn raised through an Islamic bond last week to fund the expansion of its airport and is confident of repaying creditors at its flagship conglomerate Dubai World on time, a top Dubai official told Reuters yesterday.
“We will use proceeds from the $1.25bn sukuk to fund Dubai International Airport expansion,” Sheikh Ahmed bin Saeed al-Maktoum, a close advisor and uncle to Dubai’s ruler and a key figure in the emirate’s recovery from its 2009 debt debacle, said in an interview on the sidelines of a Dubai travel show.
Sheikh Ahmed holds a host of top positions including the chairman post at its largest bank Emirates NBD, Dubai World and at crown jewel Emirates airline.
The emirate is steadily recovering from a 2009 debt crisis when Dubai World stunned global markets with plans to delay repayment on $25bn of debt.
The conglomerate reached a deal in 2010 to repay lenders over five and eight years. Other state-linked firms are in the midst of restructuring debt.
“We (Dubai World) are committed to the plan set in 2010. Dubai World and its companies are making excellent revenues and we expect the debt to be paid on time. There’s no need to extend debt when it falls due,” said Sheikh Ahmed, who also heads the Supreme Fiscal Committee.
The emirate’s rehabilitation has been helped by a revival in trade and tourism and its safe-haven status amid the Arab Spring popular revolts.
Investors are closely watching two significant maturities in 2012 from state-linked firms, Jebel Ali Free Zone (JAFZA) and DIFC Investments, which must repay a combined $3.25bn. Both are in talks with banks on refinancing the debt.
Dubai’s five-year credit default swaps, used to insure against a sovereign default, have narrowed more than 85 bps since the start of this year to around 358 bps, according to Thomson Reuters data, far below the 650 basis points level hit in late 2009 at the height of the crisis.
Emirates airline, among the top 10 in the world by passenger numbers and top customer of Airbus’ A380 superjumbo, expects 2011 profits will not be higher than those in 2010 when it posted a 52-percent rise to $1.5bn.
The airline has a $500mn bond maturing in June.
“The Emirates cash reserve is good. It is excellent, I must say. We have 4bn dirhams in cash so we are capable of paying off the debt in June ... but we are still weighing options,” the airline’s chairman said.
Sheikh Ahmed said the carrier was open to acquisitions but had no current targets. Emirates group also includes air services firm Dnata which bought an Italian flight catering group in 2010 and is hungry for more purchases.
Emirates, which carries more than 30mn passengers a year, was linked to a possible buy of loss-making airlines in India this year but its president dismissed the talk last week.
“I always say we remain open about any business opportunity to grow whether in airline business or also other services,” Sheikh Ahmed said yesterday. “Dnata has done a lot in terms of acquiring companies that are interesting. So it is not specifically about buying an aircraft.”
Asked whether Emirates would be interested in India’s Spicejet or Kingfisher, he said: “No, but I will always remain open.”