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Fitch’s Upgrade Of DP World’s Credit Rating Reflects Stable Cash Flow, Resilience
(31 October 2017)

 

DP World Ltd is the best performer among dollar-denominated bonds of US$1 billion and more across the Arabia Gulf region, according to Bloomberg.

"Buoyed by steadily improving finances and a credit-rating upgrade, state-controlled DP World Ltd.’s debt due in 2037 have handed investors a 21 percent return this year. It’s the best performer among dollar-denominated bonds of $1 billion and more in the six-nation Gulf Cooperation Council" the international news agency said in a report released today.

Fitch Ratings in July raised DP World’s credit rating to BBB+, or three steps above junk, its second upgrade in the past two years. The ratings firm commended the company’s stable cash flow and the flexibility generated by its expansion plan.

The company stands out in a region where several governments and companies have seen their credit ratings cut over the past two years as they try to adapt to the new reality of oil at about $60 a barrel. DP World, which operates about 80 terminals in 40 countries, is less dependent on crude prices than some regional companies and has benefited from this year’s pickup in global growth.

DP World’s debt is "one of the few long-duration corporate bonds out of the region with a strong stand-alone credit profile," said Usman Ahmed, a managing director of investments at Dubai-based Emirates NBD Asset Management Ltd. The securities provide "international investors with an opportunity to gain exposure to the profitable Jebel Ali Port and diversified asset base through a high-quality credit."

Still, DP World’s expansion plan, including the purchase of sister companies Maritime World and shipyard Drydocks World via a capital injection of $225 million, could hurt its credit profile. In August, the company reported a 2.5 percent decline in first-half profit to $543 million while revenue climbed 10 percent to $2.3 billion.

Bond sales from the GCC, which includes the two biggest Arab economies of Saudi Arabia and the United Arab Emirates, climbed to a record $78.9 billion this year as regional governments boosted borrowings to bridge budget deficits. Average GCC bond prices have risen about 1 percent, according to JPMorgan Chase & Co. indexes.

"DP World benefits from its global presence and a solid market position coupled with its strong shareholding structure," Ahmed said. "The company continues to demonstrate stable cash flow generation and conservative balance sheet management."

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