Jebel Ali Free Zone gets positive outlook from Fitch Ratings

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Fitch Ratings has revised Jebel Ali Free Zone’s (JAFZ’s) outlook to positive from stable and affirmed its long-term Issuer Default Rating (IDR) at BBB-. Fitch has also affirmed JAFZ Sukuk (2019) Limited’s senior secured rating at BBB-.

The revision of the outlook follows Fitch’s rating action on DP World Limited. JAFZ’s ratings are aligned with DP World’s (BBB-/Positive/F3), reflecting Fitch’s assessment of strong links between JAFZ and its parent.

Under Fitch’s parent and subsidiary rating linkage methodology, JAFZ is assessed as having strong legal, operational and strategic links with its parent DP World following the completion of the acquisition in 2015. The assessment includes the presence of cross-default clauses, centralised treasury, common management and jurisdictions and strategic importance. The strong parent company ties are JAFZ’s primary rating driver. Any material weakening in DP World’s credit profile could lead to Fitch reassessing the alignment of the ratings.

JAFZ remains a key part of Dubai’s economy, with the company and activities based in the Free Zone accounting for 20 per cent of Dubai’s GDP. JAFZ is also of strategic importance geographically, providing the link from the Jebel Ali port to Al Maktoum International Airport, and operationally. The area is also situated alongside the site for the 2020 Expo, which is likely to generate benefits for both JAFZ and its parent company when preparations and development get underway, Fitch Ratings said.

JAFZ’s revenues rose by 10 per cent to AED1,688m on improved occupancy rates and increased fee income. The company maintained stable EBITDA margins.

“While the company has provided good revenue growth and management’s attention to cost control has maintained margins, Fitch expects more moderate growth and for profitability margins to decline to historical levels in FY15 and then be maintained over the forecast period,” Fitch Ratings said.