The Abu Dhabi government is set to step in with $5.2bn of assistance for Aldar by buying assets and issuing bonds as the developer struggles to meet debt repayments amid a weakening real estate market in the capital of the United Arab Emirates.
Just over a year after extending a $10bn lifeline to Dubai’s government-owned developer Nakheel and its parent Dubai World, oil-rich Abu Dhabi has been forced to channel its wealth back into its own struggling property sector.
Abu Dhabi stepped in with a significant capital injection into its banks in 2009, but the rescue of Aldar is the first major public bail-out of a state-linked entity in the emirate.
Bankers have widely expected the government to step in, but say delays have caused concern to some investors.
Aldar is to sell assets and issue bonds to strengthen the company’s balance sheet to meet looming debt repayments later this year.
The series of transactions announced after a board meeting on Thursday include the sale and reimbursement of Dh10.9bn ($2.9bn) in assets on Yas Island, including the newly opened Ferrari World theme park, to the government.
Another Dh5.5bn in residential units and land will be sold to the government.
The company, already almost 40 per cent controlled by government-related entities, will book a Dh10.5bn impairment charge to recognise the deterioration in the value of its assets.
A Dh2.8bn convertible bond will also be issued, subject to approval at an extraordinary shareholders’ meeting, at Dh2.3 a share to the government-controlled investment arm Mubadala, which already owns 20 per cent of the developer. The bond could raise Mubadala’s stake up to 49 per cent.
Another Dh3.6bn convertible bond sold to Mubadala is due to mature in November, but the conversion could be accelerated.
Analysts say the diluting impact could raise the ire of Aldar’s shareholders, many of which are local investors who have already felt the brunt of the real estate crash.
The company, which reported a loss of Dh1.5bn for the first nine months of this year, needs to take decisive action ahead of Dh15bn of debt repayments this year, including a Dh5.7bn syndicated loan due in July.
Last March, Aldar sold to the government infrastructure at the Yas Marina Circuit, which hosts the Abu Dhabi Formula One grand prix, for Dh9n.