Aldar bonds rise over 30 points
Dubai, January 31, 2012
Yields on Abu Dhabi property developer Aldar Properties's 2014 bond rose over 30 basis points on Tuesday, a day after Reuters reported the emirate held talks to offload the government's stake in the struggling firm.
Sources familiar with discussions told Reuters that talks at the highest levels of government centred on attempts to stop Aldar's falling asset value from dragging down state investment fund Mubadala.
Mubadala denied such discussions had taken place.
Aldar's $1.25 billion 10.75 percent bond was trading at 109.000 on Tuesday, yielding 6.49 percent, up from 6.17 percent the previous day, according to Reuters data.
Yields are up sharply from 5.53 percent in early January, after a new government bailout in late December.
The Abu Dhabi government has given Aldar nearly $10 billion in bailout funds, and Mubadala played a key role by subscribing to a $2.8 billion bond issued by the developer last March.
Mubadala converted a portion of its Aldar bonds to equity in December, taking its stake to 49 percent. Full conversion could eventually raise Mubadala's stake to about 60 percent.
"It was a foregone conclusion that Aldar was going to be assumed into Mubadala over the next few years. Bondholders are just unhappy that the government are changing their tune slightly, as rumoured, hence the small sell-off," said Thomas Christie, fixed income trader at Rasmala investment bank.
"It just adds uncertainty to a situation that many thought was already resolved."
While the share price has slumped, Aldar's bonds had rallied on the implicit government support, most importantly in the form of the stake held by Mubadala. Aldar repaid on time a $1.18 billion Islamic bond that fell due last November.
"There is nervousness among investors, but I don't believe this widening (in Aldar bonds) is justified based on rumour," said Chavan Bhogaita, head of markets strategy unit at National Bank of Abu Dhabi.
"We are only one month away from the government signing a 17 billion dirham support package for the company. I don't think there is any change in the government or Abu Dhabi Inc support for Aldar."
Abu Dhabi threw Aldar a new 16.8 billion dirham ($4.6 billion) lifeline in December, buying assets from the struggling developer, retiring debt and making a fresh loan to help it complete ongoing projects. – Reuters