Dubai's Emaar properties eyes benchmark dollar sukuk

Dubai’s Emaar properties eyes benchmark dollar sukuk

Initial profit talk for 7-yr sukuk at 6.75 pct; Pricing due early Thursday; Proceeds may fund newly launched projects - analysts

July 11, 2012 4:39 by Reuters

Emaar Properties, builder of the world’s tallest tower, plans to issue a seven-year benchmark-sized sukuk this week, two market sources said on Wednesday, joining a growing list of Gulf Arab entities tapping demand for Islamic debt.

The potential sale would mark the Dubai developer’s return to the debt markets after more than a year and an opportune time to raise cheap financing.

“This may be the best time for Emaar to tap the sukuk market at a lower profit margin as the yield on its previously issued sukuk which carries a coupon rate of 8.5 percent has come down significantly to 5.7 percent now,” said Sajeer Babu, a senior investment analyst at National bank of Abu Dhabi.

A recent rally on regional credits in secondary trading has led to tighter spreads, allowing Emaar to raise capital at lower rates.

Benchmark-sized offerings are normally understood to mean at least $500 million.

Initial profit talk for the sukuk is indicated at 6.75 percent. The company is due to meet investors in London on Wednesday, with pricing due early on Thursday, the sources said.

Yields on Emaar’s 8.5 percent $500 million sukuk maturing 2016 have tightened about 200 basis points since the beginning of the year, according to Thomson Reuters data.

“Although Emaar has sufficient liquidity to meet with its short term obligations, proceeds from the new sukuk sale may be intended to fund the recently launched new projects in Dubai,” Babu added.

The company, which was hit hard by a real estate collapse in Dubai during the financial crisis, saw apartment sales plunge 85 percent last year. It is gradually shifting its focus towards the more profitable hospitality and retail sectors.

It owns the Dubai Mall, billed as the world’s largest shopping mall, and operates the Armani-branded hotels.

The Islamic debt market has been resilient during the latest phase of the euro zone crisis and most regional deals so far this year have been in the form of sukuk.

On Wednesday, the state of Qatar launched a $4 billion two-part sukuk, the largest Islamic bond from the region this year amid massive demand.

Emaar has picked Standard Chartered Plc, HSBC Holdings, Abu Dhabi’s Al Hilal Bank, Qatar’s Barwa Bank, Emirates NBD, Dubai Islamic Bank and Noor Islamic Bank for the deal.

The potential sukuk issue follows mall developer Majid Al Futtaim’s $500 million conventional bond sale last month.

Last year, Emaar used Dubai Mall as collateral to secure a $1 billion loan to help refinance upcoming debt.

Emaar shares were down 0.7 percent on Dubai’s index at 0850 GMT. The stock has rallied 18.7 percent year-to-date.

(Additional reporting by Rachna Uppal; Editing by Dinesh Nair)