Abyaar postpones sale of $1bn Islamic bonds

Kuwait's Abyaar Real Estate Development Co has postponed the sale of Islamic bonds worth up to $1 billion initially planned for this year due to the global credit crunch, a company official said on Monday.

"We have postponed the bonds until a better time. No way any company can issue sukuk now. There is no cash," Vice-president Marzouk al-Rashdan said. "We expect that the situation will get better next year."

Abyaar said in March it was in talks with Merill Lynch to issue sukuk worth $500 million and was also negotiating with NBD Investment Bank, a unit of Emirates NBD, to issue sukuk worth between $300 to $500 million, to finance its expansion plans in the region.

"The bonds (sale) will impact expansion but not current projects," al-Rashdan said, speaking in Dubai.

Sukuk are typically backed by physical assets that pay a dividend or rent to bondholders rather than interest, which Islam equates with usury.

The firm, which wants to expand into Asia and the Gulf, will also postpone a secondary listing in Dubai it planned for this year until market conditions improve, he said.

The real estate developer is also planning to develop a $1 billion resort in Egypt's Red Sea in 2010 and to invest up to 9 billion riyal ($2.40 billion) in the Saudi Arabian real estate market until 2010, Rashdan said.

He did not say how the company will fund its new projects, saying only the delay of the sukuk issue would not affect current projects.

"We have already acquired land in Jeddah and will start a real estate project there worth an initial investment of 1 billion riyal," he said. "Saudi has a huge potential because of the big population and high demand on property."

Plans to invest in the US real estate market have been also shelved as liquidity worsens, Rashdan added. "The liquidity crunch will definitely impact all property developers," he added. (Reuters)

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