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UPDATE 1-Aldar sets Mubadala bond coupon at 4 pct
March 7, 2011 / 9:59 AM / 7 years ago

UPDATE 1-Aldar sets Mubadala bond coupon at 4 pct

* $762.5 mln convertible bond part of rescue package

* Aldar shares fall 3.8 pct in Abu Dhabi trade

(Recasts, adds share price reaction, comments, background)

DUBAI, March 7 (Reuters) - Aldar Properties ALDR.AD will pay 4 percent interest on 2.8 billion dirhams ($762.5 million) of convertible bonds to be sold as part of its rescue package, a much higher rate than analysts had expected.

Abu Dhabi developer Aldar, which is selling the bonds to state-owned fund Mubadala, announced the coupon in a statement to the bourse on Monday.

Analysts said the market was expecting the interest charged by Mubadala to be notional in view of the government’s rescue of the struggling property firm.

“Most probably, the market thought it would be an interest- free convertible bond but clearly that’s not the case. This may be the reason for the Aldar shares to drop,” said Ahmed Badr, Credit Suisse research analyst.

Shares of Aldar were down 3.8 percent at 0850 GMT, underperforming the Abu Dhabi index .ADI that was 0.2 percent lower.

Aldar was thrown a $5.2 billion lifeline by Abu Dhabi in January and announced plans to sell properties such as the Ferrari theme park, the world’s first park based on the Italian sports car and racing teams. [ID:nLDE70B0LX]

The convertible bond was approved by shareholders last month.

“Mubadala are diluting the existing (Aldar) shareholders by taking more money out of the company by way of the coupon,” said an Abu Dhabi-based banker who did not want to be identified.

“But arguably, without Mubadala, Aldar would be struggling to stay afloat,” the banker said, adding that Mubadala would also need a tangible return on its investment in Aldar.

Meanwhile, credit rating agency Moody’s said in a statement that state-owned companies in the oil-rich emirate of Abu Dhabi are likely to see continued support from the government. It highlighted the recent bailout of Aldar and district cooling firm Tabreed TABR.DU. [ID:nLDE72601H] ($1=3.672 Uae Dirham)

Reporting by Praveen Menon and Rachna Uppal; Editing by Erica Billingham

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