June 21 (Bloomberg) -- Majid Al Futtaim Holding LLC, the Dubai-based owner of the City Center shopping malls, may sell five-year bonds to help refinance borrowings, fund expansion and extend debt maturities.
“The bond market offers the right maturity profile for us,” said Daniele Vecchi, group treasurer for the company. Banks prefer to lend for two to four years while it takes longer than that to build a shopping mall and for it to begin generating cash, he said.
Majid Al Futtaim announced a $2 billion medium term note program June 14, filing a prospectus with the London Stock Exchange. Barclays Capital, Emirates NBD PJSC and Standard Chartered Plc will arrange the transaction.
Dubai’s government on June 15 raised $500 million from the sale of 10-year bonds, which received more than $1.8 billion in bids from more than 90 investors. Government-owned Emirates, the world’s biggest airline by international traffic, on June 1 raised $1 billion from the sale of five-year bonds.
Majid Al Futtaim’s first bond sale “will not be an aggressive issue” as the company plans to be a recurring seller as it exchanges loans for bonds, Vecchi said. “So we will be looking in the five year because that’s where the banking market starts to be a bit weak in terms of liquidity.”
Majid Al Futtaim posted a loss of 144 million dirhams ($39 million) in 2010 compared with a profit of 479 million dirhams in the preceding year. Long-term debt stood at 8.5 billion dirhams at the end of 2010, according to the prospectus.
The company in May 2010 said it plans to invest $3.5 billion to develop shopping malls in Egypt, Lebanon, Syria and the United Arab Emirates. Its shopping mall in Beirut will be completed in October 2012 and it is proceeding with plans to build a mall in Cairo at a cost of 2.8 billion dirhams.
Standard & Poor’s assigned the company a rating of BBB, the second-lowest investment grade score.
Majid Al Futtaim ‘s business is supported by rental income from its shopping malls and “a large food retail exposure through our Carrefour franchise, which are relatively defensive businesses and performed extremely well through the crisis,” Vechhi said.
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