Emirates REIT proposes amending terms of $400 million sukuk | Reuters
Dubai-listed Emirates REIT, a sharia-compliant real estate investment trust, has offered holders of its $400 million sukuk, or Islamic bonds, to exchange their notes for a new instrument, its chief executive said on Tuesday.
Under the proposal, unsecured sukuk would be exchanged for secured ones. The company is also looking to extend its credit maturity to improve its balance sheet after the impact of the COVID-19 pandemic on its operations.
The existing sukuk mature in 2022 and the new instrument would mature in 2024.
The company last year appointed Houlihan Lokey to advise its board on a strategic review of the fund.
“Our strategic review observed that the sukuk traded at a 35-65% discount to par over the last year due to global market uncertainty around commercial real estate, structural issues with the sukuk being unsecured and prospect of impaired recovery in a default,” Arun Reddy, managing director at Houlihan Lokey, told Reuters.
“The proposal allows the company to address a number of these issues and support its important sukuk holders by providing security while also allowing sukuk holders to maintain the 5.125% rate”.
Dubai’s real estate sector has been sluggish for years due to chronic oversupply coupled with weak economic growth, a problem that has been exacerbated by the coronavirus crisis.
Morgan Stanley said in a research note on Monday that property prices are rising for the first time in six years.
“Robust demand, peaking supply growth and long lead times for new projects could lead to a tighter-than-expected market over the next several years,” it said.
Holders of the new secured sukuk will be given first-ranking mortgage security over certain assets in Dubai and its financial centre with an aggregate value of about $280 million.
“The latest value of the portfolio is $690 million versus a sukuk value of $400 million. The LTV (loan-to-value) is 61% and the additional security provided should give sukuk holders great comfort and improve significantly the tradability of the sukuk,” said Sylvain Vieujot, chief executive officer of Equitativa, the manager of Emirates REIT.
Emirates REIT continues to assess delisting because of low trading liquidity and what it considers an undervalued share price.
The fund constituted 100% of trading activity on the Nasdaq Dubai on Tuesday, data on the exchange’s website showed.
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