DUBAI: Emaar Properties, which built the world’s tallest building, priced a $500 million Islamic bond at a profit rate of 8.5 percent, three sources said, as the first UAE sukuk of the year was oversubscribed.
The five-and-a-half year sukuk, issued as part a $2 billion bond programme, attracted $1.7 billion in bids, one source close to the deal said on Thursday.
"This is a great price given real estate element. They did well to keep it at single digits and not hit 10 percent," one banker who did not want to be identified said.
The property market in the United Arab Emirates suffered in the wake of the global financial crisis as developers found themselves overstretched.
Emaar has been focusing on recurring income sources like rental fees and hospitality services to negate the impact of the property crisis.
The developer picked HSBC, RBS and Standard Chartered to arrange meetings ahead of a possible bond issue.
The bond will be listed on the London Stock Exchange.
Sukuk issuance fell 26 percent to $14 billion in 2010, according to Thomson Reuters data, in the aftermath of Dubai’s debt restructuring and high profile sukuk defaults that exposed legal uncertainties surrounding the instruments.
The industry was expected to see a revival in 2011, with sales expected to rise 60 percent, a Reuters poll found.
More to come
Analysts said Emaar could tap the markets again to meet its refinancing needs as demand was strong.
"There is definitely a lot of demand for such paper and I would expect them to tap the market again," said Ahmad Alanani, head of Middle East North Africa fixed income sales at Exotix in Dubai.
Alanani said bids for the bond sale came from both conventional and sharia-compliant institutions.
Dubai’s ruler has a 31 percent stake in Emaar, which built the towering Burj Khalifa. The company issued a five-year $500 million convertible bond last year with coupon of 7.5 percent to refinance short-term liabilities.
Emaar shares closed 0.6 percent lower on the Dubai bourse on Thursday.
The broader index dropped 0.9 percent.
Additional reporting by Sujata Rao
