Dar defaults on $100m sukuk

INVESTMENT DAR: Kuwait-based firm marks Gulf first by defaulting on Islamic bonds. (Getty Images)

Islamic investment firm, Investment Dar, confirmed on Tuesday it has defaulted on a $100 million Islamic bond after admitting it had failed to pay a 'periodic distribution' due on April 27 to holders of an issue maturing in 2010.

Nish Popat, head of fixed income at ING Investment Management in Dubai told news agency Bloomberg that the default will have a 'wider implication' as investors watch to see if the firm’s restructuring sets a precedent for Islamic investments.

''Investment firms in Kuwait have been affected the most by the credit crisis,'' Popat added.

He also noted that the market had already priced in this default probability and that the trend ''probably won’t spill over to other countries in the region.''

Back in December Dar announced it was seeking to borrow up to $1 billion to refinance its debt. In March it said it was considering selling non-core assets to raise cash.

Last month it said it had delayed releasing its 2008 accounts because the financial crisis had hit its subsidiaries forcing it to take extra care in valuing their assets.

It was also among 36 Kuwait firms that had their shares suspended on the bourse after failing to publish their earnings in time.

Meanwhile, according to Bloomberg, sales of Islamic bonds dipped 56 percent last year from a record $30.8 billion in 2007 - largely due to investors giving the Gulf region a miss as oil prices fell and investors showing an increasing tendency to avoid more complex financial products as the credit crunch began to bite.

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