UPDATE 4-DP World cuts debt with Australian ports retreat

* DP World says proceeds to pay down debts

* Ports operator says deal to close Q1 2011

* CEO says company has enough cash to meet debt maturities

(Adds CEO comments throughout)

By Shaheen Pasha

DUBAI, Dec 22 (BestGrowthStock) – Dubai’s DP World (DPW.DI: ) moved to
cut its debt and focus on emerging markets by selling 75 percent
of its Australian port operations for $1.5 billion to private
equity firm Citi Infrastructure Investors (CII).

DP World — considered one of the more profitable units of
debt-laden Dubai World [DBWLD.UL] — said on Wednesday it will
keep 25 percent of DP World Australia and will retain earnings
by continuing to manage the operations.

The ports operator, which said it had a net debt of $5.9
billion, was excluded from Dubai World’s $25 billion debt
restructuring plan.

Creditors gave that plan final approval in October, a
milestone in the Gulf emirate’s attempt to dig itself out of an
estimated $115 billion debt hole.

DP World Chief Executive Mohammed Sharaf said all the
proceeds will go to reducing net debt and he had no plans to
sell other assets.

“This is part of our strategy of continued growth in
emerging markets without increasing overall leverage in our
business,” he said on a conference call.

The deal with CII, Citi’s (C.N: ) infrastructure fund, values
DP World Australia at $1.82 billion. That implies a valuation of
about 18 times 2009 earnings before interest, tax, depreciation
and amortisation (EBITDA). In contrast, DP World trades at
approximately 14.5 times 2009 EBITDA.

“We believe the market did not price in such valuation
multiples,” Shuaa Capital analyst Kareem Murad said in a
research note.

The sale saw DP World shares end Wednesday up 6.3 percent on
Nasdaq Dubai, posting their highest close since September 2008.

“Although the Australian ports added to the diversity of
DPW’s portfolio, contributing to almost 7.6 percent of equity
adjusted throughput, growth prospects are relatively small
compared to the other regions DPW is operating in,” Murad said.

DP World has been mulling options for its Australian
operations since at least 2008.

Its duopoly in Australia is set to end after two state
governments separately expanded their ports and facilitated the
entry of Hong Kong-controlled Hutchison Ports as a third force
along with DP and Asciano Ltd. (AIO.AX: ).

“It’s going to be accretive,” Chief Financial Officer Yuvraj
Narayan said of the deal, which is slated to close towards the
end of the first quarter in 2011.

“What we lose in EBITDA, we will get back as a result of
management fees as well as our reduction in net interest costs.
We see this as a good transaction.”
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphic on Dubai restructuring http://link.reuters.com/bam45k Factbox on Dubai's maturing debt [ID:nLDE6AR04I] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

SPEEDING UP DUBAI FIX

The ports operator had $8.04 billion in liabilities at the
end of June 2010, according to a bond prospectus it updated in
November. [ID:nSGE6A601W]

Sharaf said the company is under “no pressure whatsoever to
access debt capital markets” but could consider opportunities
down the road.

It has a $3 billion revolving credit facility which is due
in 2012 and a $300 million loan taken by its Peruvian unit, due
in October 2011. Its earliest bond maturity is 2017.

Sharaf said the company has $2.7 billion cash on its balance
sheet and expects to have almost $4 billion by the close of the
transaction. “The company has enough cash to see through all its
short-term debt maturities,” Sharaf said in a separate call with
reporters.

DP World had first-half profit from continuing operations of
$206 million, up 10 percent on a recovery in container volumes.

This month, Dubai’s ruler appointed a new board for Dubai
World, naming his uncle and key adviser Sheikh Ahmed bin Saeed
al-Maktoum as chairman in a move believed to be aimed at
accelerating asset sales, among other things. [ID:nLDE6BB0AE]

“The move is consistent with what senior Dubai officials
have been saying in recent weeks about the need to take
proactive measures to reduce Dubai’s debt, but not through a
firesale of assets,” said Chavan Bhogaita, head of credit
research at National Bank of Abu Dhabi.

“This transaction by DP World is not a firesale.”

DP World Australia operates container terminals in Brisbane,
Sydney, Melbourne, Adelaide and Fremantle, with capacity of
about 3.5 million TEU per year.

“DP World is making money and is a play on regional and
global growth and I would expect it to continue to be
ring-fenced from Dubai asset sales until prices improve, and I
don’t see that happening any time soon,” said Shehzad Janab,
chief investment officer at Daman Investments.

DP World was advised by Deutsche Bank (DBKGn.DE: ) and
Citigroup Global Markets (C.N: ) while HSBC (HSBA.L: ) and UBS
(UBSN.VX: ) advised CII.

(Additional reporting by Matt Smith and Rachna Uppal)

(Editing by Amran Abocar, Alexander Smith and David Hulmes)

UPDATE 4-DP World cuts debt with Australian ports retreat