Dubai debt debacle disrupts Hochtief unit IPO

The German construction group will not pursue a public float of its concessions unit, which invests in public-private partnerships, because the capital markets have 'deteriorated decisively’ in the wake of the Emirate’s announced six-month debt standstill for its largest subsidiary.

German infrastructure developer Hochtief has decided not to pursue an initial public offering of its concessions unit, citing the “Dubai crisis” and the “resulting disturbances in the international capital markets” as reasons why the planned offering no longer made sense.

Hochtief Concessions, which has a portfolio of long-term contracts to collect revenues from infrastructure assets such as roads and airports in Europe and Latin America, had been considered a candidate for a public float at least since August. At the time  parent Hochtief disclosed that an IPO was one strategic option it was considering for closing the gap between the market value and the actual value of the unit’s concessions.

Hotchief: IPO no more
for concessions unit

But last month’s announcement by the Dubai government that it would seek a six-month debt standstill for its largest subsidiary, Dubai World, appears to have disrupted those plans. Hochtief said in a statement that as a result of the “Dubai crisis”, the “capital market environment has deteriorated decisively”.

“Under these conditions, an IPO is no longer feasible without restrictions,” the statement added.
The company also said that, even without an IPO, it has adequate financing in place for continued growth.

Hotchief Concessions manages a €1.54 billion portfolio of infrastructure asset concessions, which comprises six airport holdings, seven roads, 89 schools, two town halls, a community center, a military base, two geothermal energy projects as well as two investment partnerships, according to its website. The unit has two divisions – Hochtief AirPort, which handles airport concesions – and Hochtief PPP Solutions, which invests in public-private partnerships for other assets.

Parent company Hochtief is an Essen-based construction services conglomerate that cleared profit before taxes of €496.9 million in 2008. The concessions unit cleared €109.6 million profit before taxes that same year.