Tabreed likely to restructure debt

11 March 2010

UAE district cooling company seeking support from creditors for recapitalisation

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.

A MEED Subscription...

Subscribe or upgrade your current 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.

Get Notifications