Aldar to cut debt as business recovers

Abu Dhabi developer Aldar Properties laid out plans to cut its $3.8 billion debt by more than half in coming years as it starts to recover from a real estate slump and reaps the benefits of a merger with its main rival.

Chief Financial Officer Greg Fewer said revenue would start to improve in the third quarter as Aldar benefits from Sorouh’s revenue stream and would grow further by year-end when it begins delivering more than 7,000 units.

He said recurring income, which comes mainly from malls and hotels, would grow from the third quarter when Sorouh’s recurring revenue is integrated with Aldar’s.

Aldar, which built Abu Dhabi’s Formula One race track, will look to reduce its leverage and is aiming to slash debt to between Dh4 billion and Dh5 billion ($1.36-1.09 billion) from Dh14 billion in the next few years.

“You would expect 35 to 40 per cent debt against the value of your recurring assets that will give an optimal level of leverage and operational flexibility,” Fewer said in a conference call on Wednesday.

The firm hopes to repay the debt through receivables from its government projects and recurring income businesses.

Fewer said Aldar, with about $12 billion in assets, was looking to refinance its debt, including a $1.2 billion bond maturing next year.

“We will be requesting many discussions with banks on various debt, including the $1.2 billion debt maturing next year,” Fewer said.

The bulk of Aldar’s debt matures next year and two of those notes will be carried beyond 2014. Fewer said that no banks had so far been mandated for its refinancing plans.

In its first earnings announcement after the Sorouh takeover was completed in June, Aldar said it made second-quarter net profit of Dh1.25 billion ($340.3 million), compared with Dh418 million in the same period of 2012.-Reuters