Tabreed, the Abu Dhabi-based district cooling company, has been given approval from shareholders to raise Dh4.2 billion (US$1.14bn) from bonds and restructure two sukuk as part of the company's recapitalisation programme. Tabreed's board can now negotiate with creditors over the restructuring of sukuk that are maturing next year, it said in a statement on the Dubai Financial Market website.
Last week, Tabreed said it had delayed payments on a Dh1.7bn Islamic bond that was due on May 19. Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, and the infrastructure investment company ACWA Holdings hold most of the sukuk. Tabreed is raising fresh liquidity to plug the gap between the short-term financing liabilities it has accumulated to fund its growth and its long-term receivables from the projects it has already executed.
It may be difficult, however, for the company to raise funds in the tougher prevailing market conditions, in which new debt issuances have been on the decline and appetite for local debt has waned. There have been a few successful issuances this year, such as a 7 billion Saudi riyal (Dh6.85bn) Islamic bond sale by Saudi Electricity Company, a state-owned utility, which was four times oversubscribed. But analysts say that for a company as leveraged as Tabreed, the debt would have to be subscribe to by "strategic owners".
"Tabreed is a utility company but it's a different story altogether. They [the owners] probably will have to help Tabreed on both the equity and debt side," said Hassan Awan, an associate with the asset management division at The National Investor in Abu Dhabi. "For them to raise funds from the market would be a tough nut to crack ? it's got to be between friends and family," he said. Mubadala is the largest strategic shareholder with a 10.9 per cent stake in the company, which is 75 per cent held by the public. Mubadala also lent Tabreed Dh1.3bn this year.
Tabreed said its shareholders have also approved the reduction in the number of outstanding shares in the market by cancelling up to 970 million shares of Dh1 each. "Tabreed will determine in final terms, timing and implementation of the capital reductions, including whether to effect the capital reduction in whole or in part," the company said. Mr Awan said that by reducing the number of shares, the company was trying to rescue its share price. "The equity's worth has gone down significantly and by cancelling shares they are trying to support the price," he said.
Tabreed shares have dropped more than 66 per cent since their 12-month peak in October last year and have declined more than 50 per cent since the beginning of this year. The shares retreated more than 8 per cent in the first two sessions this week and yesterday closed 3.9 per cent lower at 39 fils. Tabreed designs, finances, constructs and operates district cooling facilities, which supply chilled water to industrial, commercial and residential air-conditioning systems. It benefited from the property boom in the region but its profitability has suffered recently as projects worth hundreds of billions of dollars have either been cancelled or delayed since the autumn of 2008.
It reported a Dh1.12bn net loss for last year, compared with a net profit of Dh73m in 2008 but it returned to profitability reporting net earnings of Dh40m in the first quarter this year. "The first-quarter profit was a one-off gain but in the long term, the company will have to come up with a plan improve its cash-flow position," Mr Awan said. skhan@thenational.ae
