Abu Dhabi property developer Sorouh said on Monday it planned to raise 4 billion dirhams ($1.09 billion) by selling asset-backed securities that comply with Islamic law to finance infrastructure projects.
Sorouh, which first said in March it planned to sell the securities, would begin marketing the bonds "over the next few weeks", it said in a statement on the Abu Dhabi bourse website.
Securitisation allows companies to package assets - such as loans, rental properties or infrastructure projects - and sell them to investors to transfer risk from their balance sheets, and free up funds for expansion.
The bonds, like traditional Islamic bonds known as sukuk, are asset backed. But unlike sukuk, they allow buyers direct access to the underlying asset.
"The proceeds from the sukuk will be used by Sorouh to finance infrastructure on Shams Abu Dhabi as well as other Sorouh projects including Saraya," the firm said.
Gulf Arab firms could raise as much as $250 billion in asset-backed securities by 2010 to meet surging demand for property and infrastructure finance, the Dubai International Financial Centre said last year.
Real estate sectors in Abu Dhabi and Dubai, the two biggest emirates of the UAE federation, have surged since they allowed expatriates to buy property; Dubai in 2002 and Abu Dhabi in 2005.
Sorouh's Shams is a $25 billion residential project on Reem island next to Abu Dhabi city.
But the global credit crisis diminished Arab appetite for securitisation as mortgage-backed bonds came under scrutiny.
Dubai mortgage lender Tamweel said in February it would hold off on securitisation plans until at least the end of the year due to market conditions, even as the value of home loans in the UAE almost doubled in the year to December.
Growing demand from Muslims for financial products, such as mortgages, that comply with their beliefs is likely to mean more demand for asset-backed debt as the market recovers.
Sorouh "is the first to securitise future contracted receivables from sub-developers", it said. The asset-backed sukuk are rated by Moody's and Standard & Poors, it said. (Reuters)
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