Emaar to issue $375m bond; may take Amlak writeoff

Note issue likely to help property firm refinance short term debt obligations.
Emaar to issue $375m bond; may take Amlak writeoff
LOAN WRITE-OFF: Emaar Properties may have to write off loans related to troubled Islamic mortgage provider Amlak. (Getty Images)
By Jason Benham
Wed 29 Sep 2010 08:49 PM

Emaar Properties may have to write off loans related to troubled Islamic mortgage provider Amlak, it said on Wednesday as it set out plans for a $375 million convertible bond issue.

In the prospectus for the bond, Emaar said Amlak - in which it holds a 48 percent stake - may need to restructure its debt obligations which would expose Emaar to "loan write offs and a decrease in the value of its investment."

Emaar said: "Amlak ... may need to restructure its debt obligations which may expose the guarantor to loan write offs and a decrease in the value of its investment."

It added: "Should Amlak's financial condition worsen or fail to improve, (Emaar) may be required to make provisions in its financial statements for potential losses arising under the inter company loans."

Analysts said the note issue was likely to help Emaar, the UAE's largest listed property firm, refinance short term debt obligations.

A banker familiar with the deal, who asked not to be named, said: "This is a pretty landmark transaction. It wasn't so long ago that real estate and Dubai equalled a 'no go'."

Amlak and rival lender Tamweel have not issued mortgages nor been traded on the market since November 2008.

On Sunday, Dubai Islamic Bank raised its stake in Tamweel to 57.33 percent, effectively ending the prospect of a long awaited Amlak Tamweel tie up.

Emaar, builder of the world's tallest tower, said on Wednesday its board approved the convertible bond issue, which requires shareholder approval.

Emaar said it will issue its $375 million bond through a special purpose vehicle which will lend the funds on to Emaar.

The convertible bond, which has an increase option of $125 million and matures in December 2015, has a coupon of 7.25 percent to 8.25 percent, the banker said.

JPMorgan, Royal Bank of Scotland and Standard Chartered are joint bookrunners. Books are to close later on Wednesday, the banker added.

Emaar's plans come after the Dubai government returned to bond markets on Wednesday with a $1.25 billion bond, its first sovereign issue since the 2009 debt crisis. Order books suggested strong investor appetite.

The banker added: "(Emaar's) objective is to term out short term debt and deleverage their balance sheet. The issue has already been pre marketed to international investors to test appetite. The main demand is from convertible and hedge fund investors in Europe, then Asia and then the region."

Among Emaar's high profile assets is Dubai Mall, the world's largest shopping centre.

The developer also has a joint venture with Italian fashion house Georgio Armani to develop luxury hotels globally and has said it will focus on expanding in the Middle East, north Africa and south Asia in 2010. (Reuters)

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