Fitch Ratings has upgraded Jebel Ali Free Zone's (Jafza) long-term Issuer Default Rating (IDR) to 'B+' from 'B' and removed it from Rating Watch Positive (RWP) where it was placed on June 1, 2012 and has given it a stable outlook.

Fitch has also assigned JAFZ Sukuk (2019) Limited a senior secured rating of 'B+'/'RR4'.

The upgrade reflects the successful completion of the Sukuk offering and bank refinancing, which addresses the refinancing maturity of a Sukuk due in November 2012.

Fitch notes that the final terms in the final documentation conformed materially to information already received.

'The rating reflects the fact that Jafza-based company activities are one of the significant contributors to Dubai's economy, currently accounting for 21.1 per cent of Dubai's GDP, and the fact that they represent a key driver for the development of the trade and transport industries in Dubai,' said Bashar Al Natoor, the director in Fitch's EMEA Corporates team in Dubai.

'Jafza maintains a diverse portfolio of land tenants in terms of industry sector and geographic base segments. Its top 10 customers represented around 10.4 per cent of total leasing revenue and the top customer represented less than 3 per cent of the leasing revenue as of December 31, 2011.

However all of Jafza's operations are based in Dubai which entails a high concentration risk,' Al Natoor added.

Fitch takes comfort from the fact Jafza's rentals and revenues from administration of real estate have held up relatively well in the past three years despite Dubai's challenging real estate market conditions. It also maintained satisfactory occupancy rates.

Almost 79 per cent of leasable land, 90 per cent of warehouses, 78 per cent of offices and 88 per cent of onsite residential accommodation (OSR) were occupied as of December 31, 2011.

Jafza's rentals are driven by land rent, which constitutes almost 40 per cent of its total leasing income and had a lease term of about seven and a half years on average and a high renewal rate, with 80 per cent of companies established in the free zone at January 1, 2007 still operating there.

However, the other 60 per cent of rents are contracted for a one-year term. As a result, rental contracts representing almost two-thirds of rental income expire every year.

Based on Fitch's rating case and liquidity analysis, the company's liquidity profile suffers from the lack of long term committed undrawn facilities and will largely depend on the amortisation schedule of the loan facility.