Emirates REIT refinances sukuk with $380m issue

Emirates REIT

Emirates REIT said on Wednesday it has issued $380 million in Islamic bonds, completing a refinancing of its existing sukuk after the Dubai-based company was unable to do so last year.

The sharia-compliant real estate investment trust rescinded in June 2021 an offer to holders of its $400 million sukuk, issued in 2017, to exchange their notes for new paper after failing to gain the required investor support.

Fitch had then downgraded the firm several notches to C, the last rating before a borrower defaults on its debt.

The new sukuk, proposed last month, are secured and have a profit rate of 9.5 percent from 5.125 percent, which Emirates REIT said “reflects the current credit environment with rising inflation, profit rates and market volatility”.

Of the 88 percent of holders of the existing sukuk who took part in the refinancing, 99 percent voted in favour, the company said. The paper will mature in December 2024 with an option to extend for a year.

An ad hoc group of investors who said they made up about 30 percent of the sukuk holders gave the refinancing proposal the nod the day it was announced.

Thierry Leleu, CEO of Equitativa, which manages Emirates REIT, said in a statement the “solid approval allows the business to now move forward into 2023 and beyond”.

Houlihan Lokey was hired by Emirates REIT in 2020 to advise its board on a strategic review after its finances were strained by the Covid-19 pandemic.

“We are extremely pleased that the overall investor engagement process also allowed the sukuk holders to gather their own view of the go forward business plan and endorse the underlying valuations of the REIT,” Arun Reddy, managing director at Houlihan Lokey, said in the statement.

Last year, a Dubai financial regulator fined Equitativa $210,000 for misleading statements regarding one of its assets.