Dubai Holding unit reports $6.4bn loss

The commercial arm of Dubai Holding, the conglomerate owned by Sheikh Mohammed bin Rashid Al Maktoum, the emirate’s ruler, on Tuesday reported a loss of Dh23.5bn ($6.4bn) for 2009.

The losses, which were caused by real estate impairment charges, were announced as the group holds talks with banks to refinance a $555m loan due in July.

After making a profit of Dh9.8bn in 2008, Dubai Holding Commercial Operations Group, Dubai Holding’s non-financial arm, said revenues had slumped 28.5 per cent to Dh9.5bn in 2009. Its property arm reported declining real estate sales and project delays.

DHCOG, described by analysts as the “least impacted” wing of Dubai Holding, has engaged PwC as it negotiates a rollover of a $555m loan due to banks that include RBS, Citigroup and Standard Chartered.

“There is not a heap of options for the banks here – the assets and cash flows are good, but the talks have been left rather late,” said one person familiar with the discussions. DHCOG includes the merged property companies Dubai Properties, Sama Dubai and Tatweer, as well as Jumeirah, a hotel chain, and the Tecom internet and media business parks.

In a statement on Tuesday, Ahmed bin Byat, chief executive of Dubai Holding, said: “As a result of the measures we took in 2009, DHCOG is well placed to meet its financial obligations in 2010.”

“There is no need to restructure outstanding debt as discussions are taking place with banks to roll over our existing facilities at commercial terms,” he said.

The refinancing talks come as other Dubai Holding units negotiate with creditors over parts of the conglomerate’s overall $12-$15bn debt burden. Dubai International Capital last week asked for a debt extension until the end of September as it faces a $1.25bn syndicated loan repayment in June.

Dubai Group, another financial arm, also faces upcoming maturities. Lazard is advising both investment companies.

DHCOG said it expected to persuade bankers to roll over loans as it will take time to extract value from its Dh124.5bn in assets, much of which is locked up in the company’s land bank in Dubai.

Dubai real estate values are starting to stabilise, according to some analysts, though others are concerned that upcoming supply will outmatch demand and cause prices to decline further.

DHCOG said it expected the Dubai real estate market to stabilise this year and recover in 2011.

Jumeirah ended the year in a strong position, said DHCOG, with occupancy levels falling to 73.4 per cent across the chain’s portfolio.

The chain, which sees average occupancy improving by 2.3 per cent this year, plans to open at least 10 more hotels over the next 18 months out of 20 new hotels under construction.

Separately, Drydocks World, a unit of Dubai World outside the troubled conglomerate’s restructuring proposal, appointed a new board on Monday, replacing chairman Sultan bin Sulayem with Khamis Buamim, amid talks to restructure $1.7bn in debts.