Tabreed defers payment on $463m Islamic bond



Dubai-listed refrigeration and cooling company Tabreed deferred payment on its AED1.7 billion ($463 million) Islamic bond due in 2011, sparking concerns the state may step in again to bail it out.

BOND DELAY: Tabreed's next sukuk payment was scheduled for May 19.
BOND DELAY: Tabreed's next sukuk payment was scheduled for May 19.

Tabreed, bailed out by Abu Dhabi last month, also said its first-quarter net profit nearly quadrupled, helped by non-cash gains from its Islamic convertible sukuk, sending its shares higher on the Dubai bourse.

Tabreed, known as the National Cooling Co, is among a number of companies in the Gulf to restructure debt after the economic boom, fuelled by record-high oil prices and easy credit, came to an abrupt end and caused a property market crash. In March Dubai World announced a restructuring proposal to pay roughly $26 billion it owed to creditors.

Tabreed, which provides cooling for projects such as the Dubai metro and Abu Dhabi’s Yas Island, said in a statement it was deferring payment on the sukuk due in 2011 as its board considered further amendments to the bond’s terms in connection with its recapitalisation programme.

The next bond payment was scheduled for May 19. Tabreed said that any amendments to the terms of the 2008 sukuk would be subject to approval by shareholders and Islamic bondholders.

Executives at Tabreed were not immediately available for comment.

The firm’s shares were up 3 percent at 0.45 dirhams at 0951 GMT, outperforming Dubai’s benchmark which eased 0.6 percent.

“They have liquidity issues. Mubadala has a strategic interest in Tabreed so I wouldn’t be surprised if Mubadala turns out to be its white knight,” said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.

In March, Abu Dhabi statement vehicle Mubadala, which owns a 16.7 percent stake in Tabreed, stepped in to offer bridge financing after Tabreed reported a loss in 2009.

The $354 million financing will help the company cover its needs while it completes a recapitalisation programme expected to last most of 2010.

Ratings agency S&P in March cut Tabreed’s long-term credit rating to CC from CCC+ as the recapitalisation was likely to lead to “some form of distressed exchange of existing obligations.”

Tabreed’s first quarter net profit soared 277.6 percent to AED40.4 million from AED10.7 million in the same period last year, boosted by non-cash gains associated with its 2008 sukuk, and growth in the firm’s chilled water business, it said on Monday.

Chilled water revenue for the quarter soared 91 percent to 117.1 million dirhams as new plants and customers came on line, it said in the statement. (Reuters)