Bloomberg News

Union Properties Plans $545 Million Debt Cut, Chairman Says

June 08, 2011

(Adds share price in fifth paragraph, property evaluation in sixth.)

June 8 (Bloomberg) -- Union Properties PJSC, Dubai’s second-biggest developer by assets, plans to repay 2 billion dirhams ($545 million) of debt this year to cut interest costs and win bank support to restructure other loans.

The builder of Dubai’s Index Tower is seeking to convince banks including Emirates NBD PJSC to delay repayment on an additional 3.5 billion dirhams to 4 billion dirhams for five years, Chairman Khalid Bin Kalban said in a telephone interview from Frankfurt yesterday. Union Properties also repaid 2 billion dirhams in 2010, he said.

“We are pre-paying so we can sit and negotiate with the banks on restructuring some of the debt that will be left,” Bin Kalban said. The company is seeking to pay interest only and delay the principle repayment until 2016.

Union Properties has been in discussions with lenders for almost three months and the response has been “positive,” Bin Kalban said. The developer is repaying debt this year with the 1.1 billion dirhams it raised from selling the Ritz Carlton Hotel and another 900 million dirhams from property sales, he said.

The shares fell 0.9 percent to 0.43 dirham at 11:28 a.m. in Dubai. They have gained 18 percent so far this year.

The company is currently evaluating all its unsold properties as part of a plan to sell the assets as a package, the chairman said. Though no potential buyers have emerged, Bin Kalban said he expects interest to increase once the assessment is complete. He estimated the value at 1.5 billion dirhams to 1.7 billion dirhams.

‘Reasonable Return’

“The return on liquid funds or cash is actually diminishing, so there are investors who are looking at reasonable return on their money” from other assets, he said.

Union Properties is also planning to complete construction of two hotels in the MotorCity development in “the coming few months,” Bin Kalban said. The Marriot Courtyard and the Renaissance hotel are 50 percent to 70 percent complete, he said. The company will award a construction contract worth about 350 million dirhams for the projects before the end of the summer, he said.

First-quarter profit rose 64 percent to 82 million dirhams from a year earlier, the company said on May 9.

--Editor: Ross Larsen, Andrew Blackman.

To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.


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