Moody’s Investors Service assigned prospective long-term ratings of A3, stable outlook, to up to approximately $2 billion (Dh7.34bn) of senior secured bullet bonds to be issued by Emirates Aluminium Company Limited (Emal).
Emal’s current financing plan envisages issuance of Series A Senior Secured Bonds of approximately $1bn due 2038, Series B Senior Secured Bonds of approximately $1bn due 2028, and possibly Series C Senior Secured Bonds in sterling due 2028.
Emal has also raised subordinated amortising bank debt facility of approximately $1.8bn due 2023. The facility will rank at the same rate with the bonds and additional project debt after the completion of Phase I of the project.
Emal’s sponsors have represented to the bank lenders that they would provide financing and complete financial close if the bonds were not issued.
On the basis of Emal’s ownership structure, and the strategic importance of its activities to Dubai and particularly to Abu Dhabi (Aa2, stable outlook), Moody’s categorises Emal as a government-related issuer and thus applies its joint default methodology.
In accordance with this methodology, Moody’s has assessed both support and dependence as high, therefore, the assigned ratings achieve an uplift from the company’s fundamental credit worthiness.
The ratings reflect the fundamental strength of the aluminium industry whereby rising costs of energy are expected to be the primary driver in reversing the long- term historical declining price trend.
It also reflects the positioning of Emal in the lowest quartile of the cost curve by the lenders’ independent aluminium market consultant.
As access to low-cost energy is a dominant source of comparative advantage in aluminium smelting, this should give the project a significant competitive advantage, said a statement.
The stable outlook for the rating of the bonds reflects the stable outlook for the project’s underlying economic characteristics, or its fundamental credit worthiness, as well as the stable outlook for Abu Dhabi sovereign rating. A change in any parameter of the joint default methodology may change the debt ratings, the statement said.
Factors that could change the rating include a change in the uplift arising from the ownership. This could be through either a change in the sovereign rating, or a change in Moody’s perception of the level of support and/or dependence.
Emal is a private joint stock company established under Abu Dhabi law for the purpose of the construction and management of a single-site aluminium smelter in Abu Dhabi.
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