Ferrari World Developer Gets Debt Help From Moody’s

The builder of the world’s biggest indoor theme park isn’t waiting long to refinance debt after winning an investment-grade rating last month.

Aldar Properties PJSC, Abu Dhabi’s largest real estate company, plans to extend maturities on its obligations, Chief Financial Officer Greg Fewer said in an interview. The builder of the sheikhdom’s biggest shopping mall is also seeking to reduce borrowings by almost 40 percent by the end of next year, he said.

“We are refinancing and managing our duration” with a bias toward longer-dated debt, Fewer said by phone Dec. 1.

“The yields remain very low and the local bank market is still flush with liquidity.”

The developer of the Ferrari World theme park expects income from hotels, offices and retail properties to climb as much as 60 per cent to Dhs1.6 billion ($436 million) a year by the end of 2015, helped by revenue from Yas Mall. Moody’s Investors Service cited among others recurring income on Nov. 26 when it raised Aldar’s credit by two levels to Baa3, its lowest investment grade.

Reducing Debt

“Recurring income from investment properties tends to be low-risk, stable and allows better visibility in terms of future earnings,” Martin Kohlhase, a Moody’s senior credit officer in Dubai, wrote last month. Aldar generates income from leasing seven hotels, 4,500 apartments, offices and retail space, according to Moody’s.

Profit surged 41 per cent in the third quarter as leasing revenue grew and homes were completed. Recurring revenue from rentals and hotels climbed 12 per cent to Dhs526 million, the company said Nov. 13.

Aldar is monitoring the market as it aims to reduce its borrowing costs next year, the CFO said. Benchmark 10-year Treasury yields fell to 2.25 per cent today from 3.03 per cent at the beginning of the year, while the yield on Aldar’s $750 million notes due December 2018 tumbled 105 basis points to 3.01 percent, according to data compiled by Bloomberg.

Real estate prices in Abu Dhabi, the city where branches of the Guggenheim and Louvre are planned, have rebounded after a crash in 2008 forced Aldar to seek a $9.8 billion government bailout.

Asset Sales

The developer, which sold assets including Ferrari World to the government as part of the bailout, will receive Dhs5.25 billion in cash payments from the state this year, the company said in a presentation to investors last year.

Abu Dhabi through funds owns more than 30 per cent of Aldar, according to Bloomberg data.

The developer aims to maintain its debt at 35 per cent to 40 per cent of the value of its recurring revenue assets, Fewer said. Liabilities fell to Dhs9.6 billion at the end of September from Dhs13.8 billion at the end of 2013, he said.

“When the market goes up, we want to be fast and financial flexibility helps,” Fewer said.

“And when the market retreats, we want to retrench but not to compromise. An investment grade structure lends itself to that plan.”