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Abu Dhabi royals-owned firm raises $300m Islamic loan

PD in July 2021 pulled a $350m Islamic bond sale ahead of pricing, saying the interest received did not match the company's plan and vision Reuters/ Hamad I Mohammed
PD in July 2021 pulled a $350m Islamic bond sale ahead of pricing, saying the interest received did not match the company's plan and vision

The Private Department of Sheikh Mohamed Bin Khalid al-Nahyan LLC (PD), a relatively small real estate company owned by members of Abu Dhabi’s ruling family, priced on Thursday $300 million of sukuk at 8.75 percent, a bank document showed.

PD in July 2021 pulled a $350 million Islamic bond sale ahead of pricing, saying the interest it received did not match the company’s “plan and vision” as laid out to potential investors.

This time, the profit rate on the three-year senior unsecured sukuk was tightened from price guidance of around 8.875 percent after more than $660 million of orders were placed, including an indicated $358 million of interest from the joint lead managers.

“Pricing is fair around those levels but we are not increasing exposure to high yield generally and the subordination of the sukuk is a concern,” Doug Bitcon, head of credit strategies at Rasmala Investment Bank, said of the price guidance.

“If we are going into high yield, we think that there are more attractive risk/reward propositions out there.”

S&P last month assigned PD a ‘BB-‘ rating for its US dollar-denominated sukuk programme, in line with the long-term issuer credit rating.

“We understand that the first issuance under the program will be up to $400 million to repay existing bank debt and fund general corporate needs,” S&P said in the pre-deal report.

“If the issuance amount is significantly lower, we will reconsider whether this meets our subordination criteria threshold.”

S&P did not immediately respond to an emailed request for comment.

Unlike conventional debt, Islamic bonds do not pay interest, which the Islamic law sharia forbids. Instead, they are structured to pay investors returns from underlying assets.

Last year’s cancelled deal launched at 5.5 percent, with the higher returns on offer on the latest issue reflecting how much yields have risen since last year as central banks led by the US Federal Reserve aggressively hike rates to tame historic inflation levels.

Despite the high yield offered, the deal attracted less appetite than five-year sukuk, rated ‘BB-‘ by Fitch, sold in late May by neighbouring Sharjah’s largest developer Arada Developments, which has links to the ruling family there. It raised $350 million at 8.125 percent in a debut deal where demand topped $720 million including $185 million from the leads.

PD, which is fully owned by 11 members of Abu Dhabi’s ruling family, is chaired by Sheikh Mohamed Bin Khalid Al Nahyan, the “direct cousin” of UAE President Sheikh Mohammed bin Zayed, an investor presentation reviewed by Reuters showed.

Abu Dhabi Commercial Bank, Citi, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, JPMorgan, Kamco Invest, KFH Capital, Mashreq and Warba Bank arranged the sukuk sale.