After years of international acquisitions, Dubai Inc has started to place some of its performing non-core assets up for sale, according to Moody's Investors Service.

This attempts to address the debt of government-related issuers (GRIs) of up to $100 billion, of which approximately half will fall due over the next three years, the Moody's Weekly Credit Outlook report said.

The sale of Dubai’s investments is likely to be a long and drawn-out process, particularly if – as is often stated – companies plan to avoid fire-sales and heavy discounts. The more distressed companies like Dubai World (not rated) or some of the leveraged investment companies may not have a choice but to sell assets fast, particularly as banks press for tangible restructuring aimed at partially settling payments on extended terms, it said.

Other Dubai entities, whose financial conditions are under less immediate pressure, including Dubai Holding Commercial Operations Group (DHCOG) may have a longer lease on life, as companies return to their core business and dispose of lucrative non-core assets along the way. Where such disposals lead to material debt reductions and the addressing of shorter-term liquidity concerns, potentially positive or stabilising credit implications for issuers in the region could be the result. At the moment, Dubai in general will be hard pressed to avoid the stigma of a distressed asset sale, the report said.

The most immediate credit pressure is on state-owned conglomerate Dubai World, which is currently negotiating a restructuring of approximately $22 billion of debt, much of this is related to its real estate subsidiary, Nakheel.

The group’s investment subsidiary, Istithmar, is presently preparing the sale of its shipping business, Inchcape Shipping Services, and also owns stakes in companies around the globe including Standard Chartered Bank, Barney’s New York, SR Technics, Kerzner, Cirque du Soleil and the QE2 cruise ship.

Shortly before year-end 2009, Istithmar sold some of its international real estate assets, including properties in London and the ‘W’ Hotel in Manhattan. Moody's says that further major asset sales will constitute one of the conditions of any amicable restructuring agreement with Dubai World’s creditor banks.

Dubai World also is the legal owner of performing strategic businesses such as DP World, one of the world’s largest container port operators, and Jebel Ali Free Zone, a major industrial free zone in Dubai. Moody's says that both entities could be sold, although the strategic nature of their businesses would make it unlikely that they would fall into international hands.

Placing greater legal distance between these generally healthy companies and the ongoing restructuring turmoil of their parent would be beneficial and could lead to stabilisation and potentially medium-term improvement of their credit, the report stated.

Other Dubai GRIs also own potentially lucrative stakes in international businesses that, in this changed environment of modesty and consolidation, must now be all regarded as non-core, it said.

DHCOG, which is owned directly by Dubai’s Ruler Sheikh Mohammed bin Rashid Al Maktoum, holds jointly with its sister company, Dubai International Capital (DIC), a 35 per cent stake in Tunisie Telecom, which was acquired in 2006 for $2.25 billion, and a 60 per cent stake in Maltese telecom company GO, also acquired in 2006 for $280 million.
 
It also still owns a stake in the UAE’s No. 2 telecom company, du. The Dubai International Financial Centre (DIFC) also holds a substantial non-core investment portfolio that includes 2.2 per cent stake in Deutsche Bank while GRI-real estate company Emaar owns a controlling stake in Asian retail company RSH.

Select foreign non-core investments held by Dubai, according to the report, include:

* Standard Chartered Bank - Istithmar (Dubai World) - 2.7pc - $1.0bn

* Inchcape Shipping Services - Istithmar (Dubai World) - 100pc - $285m

* Barney’s New York -Istithmar (Dubai World) -100pc - $825m

* Cirque du Soleil - Istithmar (Dubai World) - 20pc - NA

* Kerzner International - Istithmar (Dubai World) - 30pc - NA

* MGM Mirage - Dubai World - 9.5pc - $2.4bn

* Deutsche Bank - DIFC - 2.2pc - $1.8bn

* Tunisie Telecom - Dubai Holding (Tecom/DIC) - 35pc - $2.25bn

* GO (MaltaCom) - Dubai Holding (Tecom/DIC) - 60pc - $280m

* Doncasters - Dubai Holding (DIC) - 100pc - £700m

* Travelodge - Dubai Holding (DIC) - 100pc - £675m

* EADS - Dubai Holding (DIC) - 3.12pc - NA

* Sony - Dubai Holding (DIC) - NA

* ICICI Bank - Dubai Holding (DIC) - 2.87pc - $742m-TradeArabia News Service