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28 March 2024

DIFC plans $700m sukuk issue by end-Oct.

Published
By Reuters

DIFC Investments, the investment arm of the company running Dubai's financial free zone, is looking to raise as much as $700 million by issuing a sukuk to help repay existing debt and fund real estate development, its top executive said on Sunday.

The sukuk, DIFC Investments' first since 2007, comes at a time when a number of Dubai state-owned entities are raising cash from the market to take advantage of historically-low borrowing rates and improved economic conditions in the emirate.

For DIFC, this is reflected in the high occupancy rates in its core buildings, driving an expansion of the zone for which the new funds will partly be used to support.

The company aims to finalise the ijara-structured deal by the end of October, Essa Kazim, governor of the Dubai International Financial Centre (DIFC) and chairman of DIFC Authority, told reporters at a media event.

"We are hoping that it will be accomplished by the end of October. We are in very final stages," Kazim said.

Ijara is a leasing arrangement commonly used to structure Islamic bonds.

DIFC joins a number of other Dubai state-linked entities, including Dubai Aluminium, Meraas Holding and Tecom Investments, which are raising funds.

Chief Financial Officer Rajesh Pareek said the lifespan of the dollar-denominated issue had yet to be finalised and a group of local and international banks had been chosen to arrange the transaction, although he declined to name them.

IFR, a Thomson Reuters unit, reported last month that DIFC Investments was planning a sukuk, with key banks on a 2012 loan deal among those involved in the new deal.

The DIFC took out a $1 billion syndicated loan in May 2012 with Emirates NBD acting as financial adviser, while Standard Chartered coordinated the debt. Dubai Islamic Bank and Noor Bank also participated in the loan.

The sukuk proceeds will be used to refinance the roughly $650 million of the syndicated loan that remain, with the rest earmarked for investment in real estate by the DIFC, Kazim said.

GROWING ZONE

The DIFC has boomed since it was set up as a financial free zone in 2004, becoming the Middle East's top banking hub.

The number of registered firms operating in the DIFC jumped 7 percent in the first half of 2014 to 1,113, according to figures released in a statement on Sunday. Some 111 commercial licences have been issued since January.

With occupancy rates in commercial office and retail space owned by DIFC close to 100 per cent, the firm is nearing completion on Gate Village Two, which will add 11,000 square feet (1,022 square metres) of serviced and furnished offices.

Rapidly expanding financial markets and rising incomes in the Gulf suggest there is room for a fund management hub to develop in the region.

Kazim said the DIFC was focusing on providing a base for companies doing business in the fast-growing African market: "Our strategy is to link the European, North American economies with the markets in this part of the world."