DUBAI, United Arab Emirates (AP) — DP World, the Dubai
government-controlled port operator, said Monday it will reach into its
cash reserves to pay back $3 billion in debt half a year early.
The
move will shrink the company’s debt load by nearly 40 percent while
still leaving it with more than $1 billion in cash on hand, according to
company figures.
DP World’s ability to borrow billions to fund an
aggressive overseas expansion helped it become the world’s third
largest port operator. It is part of Dubai’s troubled Dubai World
conglomerate, but was excluded from its parent’s highly publicized debt
restructuring.
The cargo handler plans to pay off the $3 billion
balance it has outstanding on its revolving credit facility using cash
on hand in early April. The debt is due in October.
It said it will still have $1.2 billion in cash reserves afterward.
"If
they felt they had no other use for this cash, it makes sense. …
They’re in a very good financial position with ample liquidity" said
Samir Murad, an analyst at NBK Capital in Kuwait.
DP World’s
decision to repay the debt early stands in contrast to other Dubai
state-owned companies that in recent years were forced to seek new
repayment terms from lenders once their debt loads became unmanageable.
Dubai
World, the port company’s parent, signed a deal to restructure some $25
billion in debt last March, more than a year after it sent world
markets reeling when it acknowledged it couldn’t pay its bills on time.
Other
heavily indebted Dubai companies have also been forced to ask lenders
for revised repayment terms, with mixed success. Dubai World’s
shipbuilding division DryDocks World has been negotiating with creditors
for months in an effort to retool the terms on $2.2 billion it owes.
DP
World said Monday it will continue to carry about $4.7 billion in debt
once it pays off the revolving facility, a standing line of credit that
companies use to access cash quickly.
It is in talks with lenders
to finalize the terms of a new five-year revolving facility of $1
billion, but says it has no immediate need to tap that line of credit.
"We
have created a balance sheet that allows DP World to meet the long-term
strategic requirements for investment into profitable growth
opportunities, (while) maintaining a very disciplined approach to
capital allocation," said Sultan Ahmed Bin Sulayem, the company’s
chairman.
DP World manages more than 60 sea cargo terminals on six
continents, including the Middle East’s busiest in Dubai. It posted a
first-half profit of $740.9 million, and plans to report its full-year
earnings later this week.
It raised $1.5 billion in December 2010
by selling the majority of its Australian operations to an investment
fund led by Citigroup Inc. It still manages the Australian ports and has
a 25 percent interest in them.
The company is widely seen as one
of Dubai’s healthiest state-controlled companies, and it plays a crucial
role in the city-state’s trade-driven economy.
DP World is in the
middle of a big expansion of Dubai’s sprawling Jebel Ali port that is
designed to meet growing demand for years to come. It is also building
Britain’s first new deep-sea container port in more than a quarter
century, which is scheduled to open outside London by the end of next
year.
Copyright 2012 The Associated Press.