Bloomberg News

Aldar of U.A.E. Drops to Record Amid Delisting Bets; Yield Falls

December 28, 2011

Dec. 20 (Bloomberg) -- Aldar Properties PJSC tumbled to the lowest on record on investor speculation Abu Dhabi’s biggest developer by market value may be taken private.

The shares dropped 2.3 percent to 85 fils, the lowest since their listing in April 2005, at the 2 p.m. close in Abu Dhabi. Sorouh Real Estate Co., the emirate’s second biggest developer, retreated 1.2 percent to a record low of 81 fils. Abu Dhabi’s benchmark ADX General Index lost 0.8 percent to 2,373.11, closing at the lowest since March 2009.

“Investors are concerned about a possible scenario of delisting” after a bond conversion by state-owned Mubadala Development Co., Tariq Qaqish, deputy head of asset management at Dubai-based Al Mal Capital, said by e-mail today.

Aldar, grappling with tumbling property prices in Abu Dhabi, last week converted bonds valued at 2.1 billion dirhams ($572 million) held by Mubadala, its largest shareholder and an investor with stakes in Carlyle Group and General Electric Co., into shares of 1.75 dirhams each. That was at the bottom end of the agreed range of 2.30 dirhams to 1.75 dirhams.

Spokesmen for Aldar and Mubadala, who both declined to be identified because of company policy, said their companies wouldn’t comment on market speculation.

Aldar shares have dropped 63 percent this year compared with a 13 percent decline in the benchmark ADX General Index. Aldar’s shareholders include Abu Dhabi Investment Authority, National Bank of Abu Dhabi PJSC and Shuaa Capital PJSC, according to the most-recent data compiled by Bloomberg.

Prices Drop

Abu Dhabi’s government in January agreed to buy assets including a Ferrari theme park and convertible bonds for 19.2 billion dirhams to help Aldar pay creditors. State-run International Petroleum Investment Co. last year took Aabar Investments PJSC, the third-biggest shareholder in German carmaker Daimler AG, private after its shares slumped.

“The rumor of delisting is there, but I don’t believe it’s happening now or even imminently,” Mohammed Ali Yasin, chief investment officer at Capm Investment PJSC in Abu Dhabi, said by telephone. “My feeling is that some local banks are liquidating some portfolios that were used as collateral.”

Property values and rents slumped in the United Arab Emirates after banks curtailed lending and speculators pulled out due to the global credit crunch. Home prices in Abu Dhabi, the U.A.E. capital, may drop 30 percent more after declining as much as 55 percent from the market’s peak in mid-2008, according to Dubai-based Rasmala Investment Bank Ltd.

Yields Decline

The yield on Aldar’s 10.75 percent bonds maturing in May 2014 fell to the lowest in more than a month to 6.1 percent at 3:19 p.m. in Dubai. It dropped 20 basis points, or 0.20 of a percentage point, on Dec. 15 when the company announced conversion of bonds into shares for Mubadala.

The conversion “is perceived as good news because a company connected to the Abu Dhabi government is backing it,” Adnan Haider, head of fixed income & equities at Abu Dhabi Commercial Bank PJSC, said in a phone interview today. “It gives comfort to investors that Mubadala will stand behind it.”

Aldar said Oct. 31 it plans to cut its workforce by 24 percent as it focuses on existing projects and properties that generate steady income. Government-owned Tourism Development & Investment Co. said on Oct. 29 that it would delay the Zayed National Museum’s completion as well as the Louvre and Guggenheim branches due to the “magnitude of work.”

“It’s widely acknowledged that Abu Dhabi stopped a lot of projects six months ago,” Oliver Bell, lead Middle East and Africa portfolio manager at T. Rowe Price in London, said in an e-mailed response to questions today. “One potential solution would be to merge all the developers under Mubadala.” This, along with the “dilution of minority holders” after the bond conversion, leaves open questions on “how minorities would be treated,” he said.

--With assistance from Stefania Bianchi and Dana El Baltaji in Dubai. Editors: Claudia Maedler, Shaji Mathew

To contact the reporter on this story: Alaa Shahine in Dubai at asalha@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net


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