Shares of Aldar Properties rose almost 7 per cent yesterday as speculation mounted that much-needed Government support for the company will arrive in the coming days.
Aldar, the capital's largest developer, has more than Dh10 billion (US$2.72bn) of debt coming due next year and has seen its property sales dwindle in the aftermath of the global financial crisis. Without support, it would be unable to continue operations for another year, analysts said.
Company officials said last month that it would announce a "framework" for the Government aid by the end of the fourth quarter in three weeks. An Aldar spokesman yesterday said an announcement date had not yet been set.
Majed Azzam, an analyst at HC Securities, said investors were buying the shares because they now believed the financial aid would come in the form of a loan and not an equity investment that would dilute the holdings of current shareholders.
"We have heard some speculation in the market that Abu Dhabi banks may have already received funds from the Government earmarked for Aldar," Mr Azzam said. "The biggest issue with Aldar was always fears of dilution. Aid that comes in form of debt, as compared to equity, is better for the stock."
An Abu Dhabi Government official said the assistance would be likely to come in the form of a 25-year loan transferred to Aldar over the next three to four years, The National reported last month.
Pressure has been building on Aldar this year, as it spent a large portion of its cash to finish construction on major projects such as the Ferrari World Abu Dhabi theme park on Yas Island even as revenue declined.
Aldar reported a Dh731.2 million loss in the third quarter of the year, its largest yet. As of September 30, it had depleted its cash reserves to just Dh4.6bn - enough to continue operating for about eight months, according to analysts.
The Government stepped in to help Aldar by buying the infrastructure of Yas Island, including the roads, utilities and the Formula One track. About 70 per cent of this came in the form of a debt write-down due to the Government from Aldar, while the remainder will come in a cash injection, according to the company.
The Urban Planning Council, another government entity, hired Aldar, as well as the emirate's second-largest developer Sorouh Real Estate, to build public housing.
Last month, Shafqat Malik, the chief financial officer of Aldar, said the company was shifting its focus away from development and toward recurring revenue such as operating hotels, rentals and project management.
Correction: This article was changed on December 9, 2010, to reflect Shafqat Malik is as the chief financial officer of Aldar, not Sorouh.