Moody’s upgrades JAFZ’s rating, outlook ‘stable’
LONDON, September 10, 2015
Moody's Investors Service has assigned a Baa3 senior unsecured issuer rating to the Jebel Ali Free Zone (JAFZ).
Concurrently, it has upgraded to Baa3 from Ba1 the rating of JAFZ's $650 million sukuk issued by JAFZ Sukuk (2019), said a statement.
The outlook on all ratings is stable, it said.
Rehan Akbar, a Moody's assistant vice president, said: "We have upgraded JAFZ's ratings to investment grade as a result of its strong credit metrics and in recognition of its resilient and proven business model.
"Equally important, based on discussions with DP World's management, we now believe that DP World will balance its own shareholder interests with those of JAFZ's creditors."
As part of the rating action, Moody's has withdrawn JAFZ's Ba1 corporate family rating and Ba1-PD probability of default rating, in line with the rating agency's policy for issuers migrating from non-investment grade to investment grade.
The rating action reflects the strong improvement in JAFZ's credit metrics, with adjusted net debt to EBITDA and adjusted EBITDA to interest expense as of end-June.
This financial performance is the result of steady revenue and earnings growth in combination with rapid debt reduction over the past several years, said the statement.
JAFZ has been free cash flow positive since 2010 and Moody's anticipates that the company will continue to fund demand-based capex through internal cash flows while also having the flexibility to pay modest dividends, if needed, to DP World Limited (Baa3 stable), it said.
JAFZ's Baa3 rating reflects the strong competitive advantages it has as a logistics hub and as an offshore free zone connected to the busy Jebel Ali port, which is operated by DP World, it said.
Its business model benefits from stable lease revenues and high operating margins, which provide the company with a dependable recurring cash flow base.
Meanwhile, given the credit linkages between JAFZ and its sole shareholder, DP World, upward rating pressure is currently constrained by the rating of JAFZ's parent, which is also at Baa3.
Notwithstanding this, the upward rating pressure could be seen if the current financial profile is maintained with net debt to EBITDA sustained below 3.0x and JAFZ remains free cash flow positive. - TradeArabia News Service
