Emaar plans $500m sukuk

Profit talk revised to 6.5-6.625%; order books at $2.5 billion

Emaar Properties, builder of the world's tallest tower, plans to issue a $500 million seven-year sukuk this week, arranging banks said, joining a growing list of Gulf Arab entities tapping demand for Islamic debt.

The potential sale would mark the Dubai developer's return to the debt markets after more than a year and an opportune time to raise cheap financing.

"This may be the best time for Emaar to tap the sukuk market at a lower profit margin as the yield on its previously issued sukuk which carries a coupon rate of 8.5 per cent has come down significantly to 5.7 per cent now," said Sajeer Babu, a senior investment analyst at National bank of Abu Dhabi.

A recent rally on regional credits in secondary trading has led to tighter spreads, allowing Emaar to raise capital at lower rates.

Orders of around $2.5 billion during book building on Wednesday allowed the borrower to tighten profit guidance to a range of 6.5 per cent to 6.625 per cent, from the initial 6.75 per cent indicated earlier.

The deal has no fewer than eight bookrunners after Abu Dhabi Islamic Bank was added to the list after the initial announcement.

"Emaar has a lot of relationship banks, and it is to keep them all happy. In fact there was interest from many other banks, but Emaar had to turn away some," said a regional banker familiar with the deal.

Along with ADIB, Standard Chartered, HSBC Holdings, Abu Dhabi's Al Hilal Bank, Qatar's Barwa Bank, Emirates NBD, Dubai Islamic Bank and Noor Islamic Bank are mandated on the deal.

Last year, Emaar used Dubai Mall as collateral to secure a $1 billion loan to help refinance upcoming debt.

"Emaar's current financing needs include the extension of Dubai Mall, but more importantly continued financing of Indian associate Emaar MGF, as the latter has not been able to IPO," Loic Pelichet, assistant vice president for research at NBK Capital said in a research note.

The company's plans for an IPO in India, announced with it associate MGF in 2010, is not expected anytime soon.

Yields on Emaar's 8.5 per cent $500 million sukuk maturing 2016 have tightened about 200 basis points since the beginning of the year, according to Thomson Reuters data.

Emaar shares ended 0.3 per cent lower on Dubai's index . The stock has rallied 18.7 per cent year-to-date.


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