Dubai ports operator DP World said it has agreed to sell 75 percent of its stake in DP World Australia for 1.5 billion US dollars, as its debt-laden parent firm vies to reduce its liabilities. The world's fourth-largest port operator said in a statement it had agreed to off-load the bulk of its stake to Citi Infrastructure Investors and another investment partner, forming a "strategic partnership" to operate DP World's five terminals in Australia.
The transaction "will see DP World monetise 75 percent of its shares in DP World Australia," it said, adding it will continue to provide management service to the Australian operations. "The total proceeds to be received by DP World will be approximately 1.5 billion Australian dollars (1.5 billion US dollars)," it said.
It said it aimed to reduce its debt through the sale which will be completed towards the end of the first quarter of 2011, subject to regulatory approvals. "The total proceeds will go towards reducing DP World's net debt as part of our overall strategy to improve balance sheet flexibility," it said.
"This strategic partnership provides a great opportunity for DP World to remain actively involved in Australia whilst delivering on our strategy to monetise assets as part of DP World's ongoing goal to reduce leverage and focus on higher margin markets," said Yuvraj Narayan, chief financial officer of DP World in the statement.
Ratings agency Moody's in November upgraded the outlook for DP World from stable to positive after it reported substantial recovery in container trade. The port operator reported in September a 14 percent recovery in its third-quarter operations, compared to the corresponding period last year, with its 50 operating terminals handling 13 million TEU (twenty-foot equivalent unit). The company is considered the most profitable unit of the debt-laden Dubai World, which is owned by the Dubai government and agreed with its creditors in September to restructure about 24.9 billion dollars of debt.
Banks agreed to reschedule around 14.4 billion dollars of debts over five and eight years. The deal averted a distress sale of its wide range of foreign assets. The newly appointed chairman of Dubai World, Sheikh Ahmed bin Saeed al-Maktoum, renewed the company's pledge to meet its debt obligations. DP World Australia operates container terminals in Adelaide, Brisbane, Fremantle, Melbourne, and Sydney.
It has a capacity to handle in excess of 3.5 million TEU per annum, approximately 50 percent of the total Australian container market, the statement said. In 2009, DP World Australia generated equity-adjusted earnings of 96 million Australian dollars, before deducting interests, tax, depreciation and amortisation.