Dubai-based global marine terminal operator DP World (DPW) has announced that Moody's Investors Service has upgraded its long-term issuer rating to Baa2 from Baa3 and the long-term issuer rating of Jebel Ali Free Zone FZE (JAFZ) to Baa2 from Baa3.

The outlook on all ratings is stable, said a statement from the company.

Rehan Akbar, assistant vice president – analyst, Moody's Investors Service, said: “Our decision to upgrade DP World's ratings is a result of the company's credit metrics broadly meeting the criteria for an upgrade in conjunction with our organisation recognising that the company retains a degree of financial cushion in its credit metrics at the Baa2 level despite the current challenging global trade environment.”

“JAFZ's upgrade directly reflects the company's close interlinkages with parent DP World as well as the robustness of its credit profile,” he added.

DP World has strong liquidity with reported cash balances of about $1.3 billion as of end-June 2016 while Moody's estimates annual operating cash flow generation in excess of $2.0 billion on a reported basis in 2016, said a statement.
 
However, the port operator has material on-going capital expenditure needs with 2016 management guidance of $1.2 billion - $1.4 billion and $1.2 billion in 2017. This includes about $150 million - $200 million of annual maintenance capex, it said.
 
Moody's forecasts dividend and interest payments to be an additional $650-$700 million, leaving the company broadly free cash flow neutral over the next 12-18 months absent M&A activity, it added.
 
In light of a $1.5 billion Sukuk maturing in 2017, the company prudently issued a $1.2 billion 7-year Sukuk in May 2016 through a tender offer on the 2017 Sukuk, leaving about $1 billion due from July 2016 to year-end 2017. The company also has an undrawn $2 billion revolver available to it which matures in mid-2019, said the statement.
 
JAFZ has good liquidity as Moody's forecasts adjusted funds from operations in excess of $380 million over the next 12 months and the company has available cash of about $55 million as of year-end 2015.
 
JAFZ has no upcoming maturities over the next 12 months as it has prepaid its syndicated loan facility in 2015 following which its sole debt obligation is the $650 million sukuk due in 2019.
 
Within the context of JAFZ's current business plan, Moody's sees little reason for the company to issue new debt and in its view there is a high likelihood that future fund raising will be centralised at the DP World’s level, it stated. – TradeArabia News Service