Abu Dhabi agrees $5.2bn Aldar bailout

16 January 2011

Government to pay $3bn for assets, including Ferrari World theme park

The government of Abu Dhabi has agreed to a $5.2bn rescue plan for real estate developer Aldar Properties to help the company deal with a collapse in real estate prices.

The deal follows a AED10.5bn ($2.86bn) impairment to the value of Aldar’s assets, cutting the firm’s equity base to AED4.3bn from AED14.8bn, according to HC Securities.

The cash injection from Abu Dhabi will come in the form of a AED10.9bn sale of assets on Yas Island, including the Ferrari World theme park, and the sale of AED5.5bn of residential units and land. A further AED2.8bn will be raised through the issue of a convertible bond to state-owned investment group Mubadala, which is also a major shareholder in Aldar, subject to approval by Aldar’s shareholders.

The funding agreement ends months of speculation about how the government and Aldar would fix a funding gap in the company. Analysts at Cairo-based EFG Hermes had estimated in December 2010 that Aldar faced a AED6.1bn funding gap in 2011 alone.

Sources close to the situation said Aldar had first approached the Abu Dhabi government and Mubadala to arrange a financial rescue package as early as September 2010.

The latest bailout is the second time that Aldar has sold assets on Yas Island to the government to shore up its finances. In February 2010, Aldar sold the Marina Circuit, which hosts the Abu Dhabi Formula One Grand Prix, to the government after reporting a AED562m loss in the fourth quarter of 2009.

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