International ratings agency Standard & Poor’s (S&P) expects that Abu Dhabi’s National Central Cooling Company (Tabreed) will have to restructure its debt after the company announced on 9 March that it is in discussions with investors to provide long-term capital to support the business.   

S&P has also lowered its long-term credit rating for Tabreed to CC from CCC+, stating the potential recapitalisation is likely to lead to a review of the terms and conditions of existing outstanding debt.

“Our view is that there is a clear likelihood that there will be some form of review and restructuring of Tabreed’s debt going forward,” says Karim Nassif, credit analyst, S&P. “Tabreed needs to decide how to resolve key issues such as what will and won’t be affected.”

Abu Dhabi’s government-owned Mubadala Development Company owns a 16.7 per cent stake in Tabreed. It has offered $354m in bridge financing to cover the company’s needs, while it completes the recapitalisation programme expected to last most of 2010.

Tabreed says it aims to call a shareholders meeting to vote on the recapitalisation by mid-April.

S&P also revised its opinion of further potential support to Tabreed from the Abu Dhabi government to low from moderate, adding the company is of limited importance to the emirate (MEED 4:3:10).  

On 9 March, Tabreed posted a AED1.118bn ($305m) net loss for 2009 due to a non-cash impairment charge of AED1.16bn.

Shares in the company fell 9.5 per cent, close to the maximum 10 per cent allowed, on the back of the announcement.

In February, S&P lowered Tabreed’s long-term credit rating to CCC+ from B+, reflecting concerns about weak liquidity.

Uncertainty is growing over the likelihood of future sovereign support for Abu Dhabi government-related companies going forward. On 4 March, rating agency Moody’s downgraded seven of the emirate’s companies because there is no explicit agreement obligating the government to support them.