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UAE’s Tabreed in bailout, cap hike after 2009 loss

By JASON BENHAM www.arabnews.com

DUBAI: Tabreed, the Middle East’s largest district cooling firm, will get a $354 million bailout from Abu Dhabi after it made a loss for 2009, a move analysts said may pave the way for more state aid for struggling firms.

The bailout follows Abu Dhabi developer Aldar Properties’ sale of infrastructure and other property assets at its Yas Island project to the Abu Dhabi government in February.

Abu Dhabi state investment vehicle Mubadala, which has a 16.7 percent stake in Tabreedwill offer bridge financing to cover its needs while it completes a recapitalization program which is expected to take most of 2010, Tabreed said on Monday.

Dubai-listed Tabreed, which provides centralized cooling for projects such as the Dubai Metro and Abu Dhabi’s Yas Island and is also known as the National Central Cooling Co., posted a surprise $305 million loss for 2009 due to a non-cash impairment charge of 1.16 billion dirhams.

“There are a number of scenarios that everyone is speculating and discussing and one of them is an investment company from Abu Dhabi playing a role in supporting an Abu Dhabi company,” said Ali Khan, managing director and head of brokerage at Arqaam Capital.

“I think the market would like to see further consolidation and I can see more commercially driven, carefully thought out deals done between Abu Dhabi and Dubai,” he added.

In January Abu Dhabi’s Aabar Investments agreed to buy a 70 percent stake in Dubai contractor Arabtec for $1.7 billion.

Tabreed’s chief financial officer Steve Ridlington told Reuters in an interview the loan would be sufficient to see the firm through the recapitalization process.

Shares in Tabreed closed down 9.5 percent, underperforming Dubai’s bourse which ended 1.7 percent up.

“As far as I am concerned it’s definitely a bailout but it’s a positive move in the sense that the government is helping out a firm close to its heart,” said Mohammed Yasin, Shuaa Securities chief executive.

In February ratings agency Standard and Poor’s lowered Tabreed’s long-term issuer credit rating to CCC+ from B+, reflecting concerns about weak liquidity.

Tabreed is in discussions with strategic investors to provide long-term capital to support the business, the firm said in a statement. Options for new capital include a private share placing or public offering.

The company said it will call a shareholders meeting to vote on the recapitalization by mid-April. Tabreed said it would seek shareholders’ approval to restructure two sukuks worth a total of $663 million, a reduction in the capital of the firm by up to 970 million dirhams and the issue or guarantee of 4.2 billion dirhams of sukuk.

Tabreed’s impairment charges for 2009 were largely due to the writedown in the value of its assets, Ridlington said, adding that 8 percent of the charges were due to canceled projects and 5 percent due to receivables that were written off.

The firm has around 4 billion dirhams of short-term debt.

He said he expected to report a profit in 2010 due largely to 13 new plants coming on stream in 2010, which would help boost revenues.

Tabreed made a net profit attributable to shareholders of 23.98 million dirhams in the fourth quarter of 2008 and a full year 2008 net profit of 73 million dirhams.

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