Dubai World’s Asset Disposals Seen Slow as Loan Repayments Loom

Dubai World’s plan to sell a U.K. warehouse developer owned by a subsidiary will do little to help the Middle East company’s attempt to raise about $15 billion to fund debt repayments.

Dubai World unit Economic Zones World FZE yesterday announced the sale of EZW Gazeley Ltd. to Toronto-based Brookfield Property Partners LP and some institutions. Terms of the transaction weren’t disclosed. A person briefed on the situation said in April that the business was valued at about 300 million pounds ($465 million).

The proceeds of the sale will be used to pre-pay a portion of an Islamic loan, the company said. Dubai World, one of the emirate’s three main state-owned holding companies, will seek to push ahead with its own asset sales over the next two years as it needs to repay $4.4 billion dollars to creditors in 2015 and another $10.3 billion by 2018.

The Gazeley sale “is a step in the right direction for the GRE’s deleveraging efforts,” Gus Chehayeb, the Dubai-based research director for the Middle East at investment bank Exotix Ltd. said by phone yesterday. However, there will be “little benefit” from this sale for Dubai World creditors and the company “is way behind schedule in terms of disposing off its other assets, which are not very marketable,” he said.

Dubai World roiled global markets in November 2009 when it asked creditors to delay about $25 billion of debt maturities. The emirate, which was on the brink of a default that year, was rescued by a $20 billion loan from the United Arab Emirates central bank and the Abu Dhabi government and two years later Dubai World agreed with about 80 lenders to delay repayments.

Economic Rebound

Economic Zones World’s unit Jebel Ali Free Zone FZE, a Dubai-based business park operator, raised a 4.4 billion-dirham ($1.2 billion) loan last year to help repay a sukuk. It will use the proceeds from the sale of London-based Gazeley, which it bought from Wal-Mart Stores Inc. in 2008, to pay down the debt.

Dubai World was one of several companies hurt by the emirate’s property crash during the global financial crisis and by frozen credit markets. Its other assets include port operator DP World Ltd., private-equity company Istithmar World PJSC, the Atlantis hotel on Dubai’s palm-shaped islands, and a 5.3 percent stake in Las Vegas casino operator MGM Resorts International.

Dubai World also owned property company Nakheel PJSC, the developer of Dubai’s palm islands, before it was taken over in 2010 by the government in separate debt restructuring. Companies based in Dubai have restructured more than $40 billion of liabilities since 2009 to help revive the economy.

As Dubai’s economy has recovered from the impact of the global financial crisis with a rebound in tourism, trade and property prices, there have been signs asset sales may revive. Earlier this month, Abu Dhabi’s Mubadala Development Co. said it will buy a 50 percent stake in state-owned Dubai Aluminium Co. and merge another aluminum smelter to create $15 billion joint venture. The deal’s value was not disclosed.