Mubasher: Moody's Investors Service has upgraded the long-term issuer rating of Jebel Ali Free Zone (JAFZ) to Baa2 from Baa3, with a ‘Stable’ outlook.
"JAFZ's upgrade directly reflects the company's close interlinkages with parent DP World as well as the robustness of its credit profile," analyst who works as Moody's Assistant Vice President Rehan Akbar said based on an issued report.
The rating upgraded by Moody’s reflects resilience of JAFz’s business model with sustainable competitive advantages as an offshore business and logistics hub connected to the Jebel Ali mega-port; recurring cash flow base enhanced by a large number of rental contracts; and strong credit metric.
“Moody's adjusted net debt to EBITDA reaching 1.5x and adjusted FFO interest coverage of 5.7x as of year-end 2015. Nevertheless, JAFZ's rating is constrained by the rating of its parent DP World while its geographic concentration in Dubai is also a constraining factor,” the report said.
It added that JAFZ's EBITDA margins, as adjusted by the ratings agency, have consistently exceeded 70% since 2008 and are currently around 80%.
“Occupancy rates have remained strong across its portfolio, with both warehouses and land plots about 90% leased and accommodation units at about 100% as of end-June 2016. Office occupancy rates have fallen to 77% as of end-June 2016 from 85% as of year-end 2015 as a result of capacity additions in conjunction with weak demand for office space,” Moody’s added.
Moody’s noted that JAFZ is exposed to economic volatility in Dubai and the broader region, while facing a degree of competition from various free zones and logistic parks within the UAE.
“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,” it added.
The ratings agency clarified that JAFZ has no upcoming maturities over the coming 12 months as it has prepaid its syndicated loan facility in 2015 following which its sole debt obligation is the $650 million sukuk that is due in 2019.
