Wednesday 16 February 2011

FT Tilt - One Dubai holding asset becomes extra-sellable(Registration)

The sale of Dubai Holding's 20 per cent stake in du, the UAE's second telecommunications operator, became a whole lot more feasible on Tuesday, after the UAE government slashed the amount of money du must pay in royalties to the federal government.

Dubai Holding, one of the three pillar companies of Dubai Inc, faces a pretty serious cash crunch as big debt payments come due in the coming year. But like the rest of Dubai Inc, its assets aren't entirely mired in the Dubai real estate crisis, and the company has the option to raise a decent sum of cash from asset sales, particularly in telecommunications. As Moody'ssaid on Tuesday:

The potential disposals relate mainly to its telecom assets. Among the three largest are its 19.5% stake in du (market value at ca. AED 2.8bn [$760m]), Axiom and Tunisie Telecom which had a carrying value of ca. AED 7bn when last valued at FYE 2009 (this compares to an estimated year-end 2010 group debt of ca. AED 14bn per year end 2010). A degree of uncertainty regarding the execution on possible disposal options remains. There is therefore scope for the liquidity and refinancing pressure to subside quickly if these disposal options were used.

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