Dewa delays securitisation

09 November 2007
$3.7bn financing programme suspended as firm seeks credit rating

The Dubai Electricity and Water Authority (Dewa) has suspended its $3,700 million securitisation programme, launched in the summer of 2007, to avoid putting pressure on the credit rating for the firm’s upcoming $2,000 million sukuk issue.

The $1,000 million securitisation currently issued under the programme involves the ring-fencing of about 15 per cent of the firm’s receivables for the repayment of the debt. If further securitisations are launched, it will put more demands on the firm’s cash flow.

A senior banker close to the deal says Dewa has suspended plans to issue further securitisations to ensure it retains its AA- and A1 ratings on the upcoming sukuk issue.

“A portion of the company’s cash flow is not available to repay the sukuk because it is allocated to the securitisation,” says Erwin van Lumich, an analyst at ratings agency Fitch Ratings.

“That is not a problem at the moment, but if the size of the securitisation was increased that would result in ratings pressure.”

The securitisation programme could be relaunched as the company grows and the cost of servicing its debts as a proportion of total income decreases. But in the short term, no further securitisations will be issued.

Calyon and ABN Amro were mandated to manage the launch of the securitisation, which was originally intended to be $2,000 million and was privately rated by Fitch and Moody’s Investors Service. Because the cash to repay the securitisation is ring-fenced out of the firm’s profits, the rating for this debt will not be affected by the sukuk issue. The sukuk programme has also been rated by the same two agencies.

Barclays Capital, Citigroup and Dubai Islamic Bank have been mandated as financial advisers on the current sukuk issue.

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