Jebel Ali Free Zone's rating reflects resilient business model, Moody's says

Moody's completes periodic review of Jebel Ali Free Zone (Jafza) ratings

The Jebel Ali Free Zone, the emirate's largest, is one of a number to offer discounts and fee waivers to support companies affected by the coronavirus. Pawan Singh / The National

The business model of Dubai’s Jebel Ali Free Zone, one the of the biggest trading hubs in the region, and it strategic location gives it a competitive edge and ‘reliance’ to weather business cycles, which is reflected in its credit rating, according to Moody’s Investors Service.

Jafza's long-term issuer rating of Baa2 underpins the advantages it gets through its connectivity with Dubai's Jebel Ali Port and it has continuous cash flow from contracts with tenants at the free zone, Moody's said in a report on Monday.

The rating "combines the resilience of its business model with sustainable competitive advantages as an offshore business and logistics hub connected to the Jebel Ali mega-port as well as a reliable recurring cash flow base backed by a large pool of rental contracts", Moody's said.

Dubai-based global ports operator DP World operates the Mina Rashid port and Jebel Ali port in the emirate. It plans to spend between Dh500 million and Dh1 billion to expand facilities at the Jebel Ali port - a major transshipment port and the largest port in the UAE - this year, which will further benefit the adjacent trade zone.

The UAE introduced a series of economic measures and reforms to attract foreign investors, as it looks to create jobs and diversify its economy away from oil. Jafza said last month it is offering its customers services to obtain long-term visas as part of Dubai's efforts to attract more investors and specialised talent to the country.

The Dubai government-owned Jafza in May also said it will return cash and bank guarantees to clients through a new initiative meant to inject Dh1.3bn into the emirate’s economy.

The rating reflects Moody's expectation that DP World will maintain financial policies that will not affect Jafza's credit profile, it said.

However, Moody's expects that DP World will "upstream" Jafza's excess cash flows through dividend payments.

The credit rating agency released comments after it completed a periodic review of the Jebel Ali Free Zone ratings.

"Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodologies, recent developments, and a comparison of the financial and operating profile to similarly rated peers," it said.