Debt pressure on Abu Dhabi private firms
Abu Dhabi, December 23, 2010
More Abu Dhabi firms could face pressure to restructure debt coming due in the next 12-18 months, but bankers and analysts said the wealthy emirate's private sector was better off than other regional peers.
Two high-profile Abu Dhabi names have in recent weeks acknowledged financial difficulties, the latest being private contractor Al Jaber Group which this week said it was in talks with banks to renegotiate its debt repayments.
"There are Abu Dhabi entities going through financial difficulty, and some will need to restructure or renegotiate loans," a Gulf-based analyst said on condition on anonymity.
The Gulf has about $28 billion in debt due to mature in 2012, the majority being held by entities based in Dubai and Abu Dhabi, Moody's said in a report earlier this year, the bulk of it by investment holding firms and property-related firms.
Al Jaber's announcement comes as the market anticipates a rescue plan for state-linked developer Aldar Properties, shifting focus to the private sector.
Aldar, which faces a funding gap of 6.1 billion dirhams ($1.66 billion) to the end of 2011, according to investment bank EFG-Hermes, said in November it was in final stages of talks with the government over its cash needs.
"Al Jaber was created to benefit from the contracting business in Abu Dhabi but there are not that many large scale private family businesses there, unlike Dubai," said a Gulf-based banker who did not want to be identified.
"Real businesses are suffering across the UAE because banks are not ready to lend just yet, but they are willing to work with borrowers to roll over or refinance existing loans."
Lending to the private sector across the Gulf region tightened after the onset of the global financial crisis and high profile defaults at two Saudi conglomerates, from which it has struggled to recover even though liquidity has improved.
"There is loan growth in Abu Dhabi, but I would assume it is directed more towards government-related entities," said Giyas Gokkent, group chief economist at National Bank of Abu Dhabi.
"The entities linked to government should find it easier to access funds, while those that are not as closely tied could find it more difficult."
Mid and top-tier companies in the private sector are likely to be the focus of syndicate lenders in the next two years, bankers at a recent conference in Dubai said.
Abu Dhabi-linked names still offered attractive lending opportunities as the emirate - the wealthiest of the seven which make up the UAE - was largely shielded from the debt troubles afflicting neighbour Dubai.
"There's a lot of appetite for good credit in this region - but that's the government-related entities (GREs)," said one international banker at the conference, adding Abu Dhabi, Qatar and Saudi Arabia were the most attractive markets for lenders.
International investors became far more familiar with Dubai after the debt troubles of the glitzy emirate came to light a year ago, and concerns were raised about the government's ability to provide financial support. Abu Dhabi and its banks signed up for half of Dubai's $20 billion rescue programme for state-owned enterprises such as Dubai World. -Reuters