DIFC Investments needs up to $600m cash from Dubai government

11 August 2010

Government may also have to convert $1bn loan into equity

DIFC Investments (DIFCI), the investment arm of the Dubai International Financial Centre (DIFC) may need a cash injection from Dubai government of up to $600m, say analysts at US bank JP Morgan.

DIFCI is currently in the process of trying to sell off around $1bn of assets in a bid to pay off debts, thought to total around $3.1bn. JP Morgan says that to make the company’s capital structure sustainable the government will also need to convert a $1bn loan to the company into equity.

“We believe that the government of Dubai will have to equitise its entire $1 billion loan in DIFCI, in addition to injecting an additional $300-600mn for the company to achieve a sustainable capital structure,” says Zafar Nazim, emerging markets analyst at JP Morgan in a report issued 11 August.

If the government converts the $1bn loan into equity it would save DIFCI nearly $65m in interest costs.

DIFCI has a $1.25bn sukuk (Islamic bond) due to repaid in 2012 and Nazim says that proceeds from asset disposals “will likely fall well short of the amount needed to pay off the sukuk.”

Nazim also raised estimates that the sustainable level of debt on DIFCI is around $400-700m.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.