* DP World says proceeds to pay down debts
* Ports operator says deal to close Q1 2011
* CEO says company has enough cash to meet debt maturities
(Adds CEO comments throughout)
By Shaheen Pasha
DUBAI, Dec 22 (Reuters) - Dubai's DP World moved to cut its debt and focus on emerging markets by selling 75 percent of its Australian port operations for $1.5 billion to private equity firm Citi Infrastructure Investors (CII).
DP World -- considered one of the more profitable units of debt-laden Dubai World -- said on Wednesday it will keep 25 percent of DP World Australia and will retain earnings by continuing to manage the operations.
The ports operator, which said it had a net debt of $5.9 billion, was excluded from Dubai World's $25 billion debt restructuring plan.
Creditors gave that plan final approval in October, a milestone in the Gulf emirate's attempt to dig itself out of an estimated $115 billion debt hole.
DP World Chief Executive Mohammed Sharaf said all the proceeds will go to reducing net debt and he had no plans to sell other assets.
"This is part of our strategy of continued growth in emerging markets without increasing overall leverage in our business," he said on a conference call.
The deal with CII, Citi's infrastructure fund, values DP World Australia at $1.82 billion. That implies a valuation of about 18 times 2009 earnings before interest, tax, depreciation and amortisation (EBITDA). In contrast, DP World trades at approximately 14.5 times 2009 EBITDA.
"We believe the market did not price in such valuation multiples," Shuaa Capital analyst Kareem Murad said in a research note.
The sale saw DP World shares end Wednesday up 6.3 percent on Nasdaq Dubai, posting their highest close since September 2008.
"Although the Australian ports added to the diversity of DPW's portfolio, contributing to almost 7.6 percent of equity adjusted throughput, growth prospects are relatively small compared to the other regions DPW is operating in," Murad said.
DP World has been mulling options for its Australian operations since at least 2008.
Its duopoly in Australia is set to end after two state governments separately expanded their ports and facilitated the entry of Hong Kong-controlled Hutchison Ports as a third force along with DP and Asciano Ltd..
"It's going to be accretive," Chief Financial Officer Yuvraj Narayan said of the deal, which is slated to close towards the end of the first quarter in 2011.
"What we lose in EBITDA, we will get back as a result of management fees as well as our reduction in net interest costs. We see this as a good transaction."
SPEEDING UP DUBAI FIX
The ports operator had $8.04 billion in liabilities at the end of June 2010, according to a bond prospectus it updated in November.
Sharaf said the company is under "no pressure whatsoever to access debt capital markets" but could consider opportunities down the road.
It has a $3 billion revolving credit facility which is due in 2012 and a $300 million loan taken by its Peruvian unit, due in October 2011. Its earliest bond maturity is 2017.
Sharaf said the company has $2.7 billion cash on its balance sheet and expects to have almost $4 billion by the close of the transaction. "The company has enough cash to see through all its short-term debt maturities," Sharaf said in a separate call with reporters.
DP World had first-half profit from continuing operations of $206 million, up 10 percent on a recovery in container volumes.
This month, Dubai's ruler appointed a new board for Dubai World, naming his uncle and key adviser Sheikh Ahmed bin Saeed al-Maktoum as chairman in a move believed to be aimed at accelerating asset sales, among other things.
"The move is consistent with what senior Dubai officials have been saying in recent weeks about the need to take proactive measures to reduce Dubai's debt, but not through a firesale of assets," said Chavan Bhogaita, head of credit research at National Bank of Abu Dhabi.
"This transaction by DP World is not a firesale."
DP World Australia operates container terminals in Brisbane, Sydney, Melbourne, Adelaide and Fremantle, with capacity of about 3.5 million TEU per year.
"DP World is making money and is a play on regional and global growth and I would expect it to continue to be ring-fenced from Dubai asset sales until prices improve, and I don't see that happening any time soon," said Shehzad Janab, chief investment officer at Daman Investments.
DP World was advised by Deutsche Bank and Citigroup Global Markets while HSBC and UBS advised CII.
(Additional reporting by Matt Smith and Rachna Uppal)
(Editing by Amran Abocar, Alexander Smith and David Hulmes)