Yas Island asset sales will keep firm on track

ABU DHABI // The sale announced by Aldar Properties of several assets on Yas Island will provide a boon to the company in a tough economic period, even if it remains unclear how the deals will be structured, analysts say. The company's full financial statement released last week valued the sale of the Formula One Grand Prix circuit, roads, infrastructure and marina at Dh9.13 billion (US$2.48bn).

Aldar also revealed its first quarterly loss, one of Dh562 million. Analysts expected the sale of the circuit, but the inclusion of the other assets was a surprise. In its financial statement, Aldar described the transaction as follows: "During the year, the group disposed of certain infrastructure and other property assets at Yas Island with a carrying amount of Dh9,138.1 million, to the Government of Abu Dhabi under a sale purchase agreement."

The question is, how will this credit be transferred to Aldar? Will the Government pay cash or, as some analysts believe, simply write off some of the debt it is owed by Aldar? Shafqat Malik, the chief financial officer of Aldar, inferred by saying very little about the issue in a conference call with analysts last Wednesday that this was still to be decided. A sign that these negotiations are continuing could be found in the fact that Mr Malik left out the sale proceeds of the Yas Island assets in his description of the company's

Chest Riley, an analyst at Nomura Securities, said in a research note: "We think it is likely that this 'sale' will be reflected in a 'repayment' of the Yas Island loan for the value of infrastructure and [plant, property and equipment], so there is probably no cash to be remitted back to the company." Either a cash injection or a reduction of debt would benefit Aldar in the year ahead. But so far, investors have not responded positively. Aldar's shares rose less than 1 per cent yesterday to Dh3.81, but they have dropped by 2.3 per cent since the company announced its losses for the fourth quarter.