Text size:

  • Small
  • Normal
  • Large

Emaar approves plan to turn bonds into shares

Agreed at a meeting to requests from two bondholders of its US$500 million five-year bond to convert a first tranche of debt into 18.7 million shares.

Emaar Properties has approved a plan to enable holders of its convertible bonds to turn the notes into equities in a move that could ultimately create about 419.3 million new shares.

At a meeting on Tuesday, Emaar’s board agreed to requests from two bondholders of its US$500 million five-year bond to convert a first tranche of debt into 18.7 million shares.

In a statement confirming the decision to the Dubai bourse today Emaar announced its board had agreed to requests and would allow other bondholders to do likewise.

“The board of directors … decided to approve the increase of the company’s share capital by issuing 18.7 million shares for the account of the note holders as per the conversion notices received and to approve all similar conversion requests that may be received by the company in future,” said Ayman Hamdy, Emaar’s legal executive director.

The decision is likely to trigger a spate of similar conversions as others follow suit, netting bondholders, who bought into the five-year bond in 2010 in the aftermath of the financial crisis, returns estimated to stand as high as 70 per cent.

According to Bloomberg data, if all the bonds are converted, Emaar’s total 6 billion shareholding will increase by 6.5 per cent.

Analysts, concerned about the dilution effect, expressed relief that the extra shares were to be issued in stages rather than in one go.

“Clearly this is a more positive outcome than some had been expecting,” said Talal Ghandour, the managing director and co-head of equities for the Middle East and North Africa at Bank of America Merrill Lynch. “However, I would caution that Emaar wasn’t exactly under pressure in the last week. So expect a small relief rally but nothing more than that.”

After falling 3.2 per cent on Monday and 0.7 per cent on Tuesday following the news that the board was meeting to discuss the conversion, Emaar shares rallied 2.2 per cent yesterday to reach Dh7.25.

The company, which built Dubai’s Burj Khalifa, has announced a number of large and costly projects in recent months. These include a 13.63 million square metre golf course and villa development, which it plans to build on Dubai World Central land close to the Expo 2020 site.

The Lagoons, a 6 million square metre mixed use project around a 40-hectare lagoon, which Emaar is developing with Dubai Holding; and a $545 million canal to be built in Downtown Dubai are among the other projects.

“The move will reduce Emaar’s debt ratio, which is positive for the company,” said Tariq Qaqish, the head of asset management at Al Mal Capital. “The challenge, however, will be for Emaar to generate decent returns for shareholders on that basis.”

“Equity is the most expensive form of capital to raise,” said Saleem Khokhar, the head of equities at National Bank of Abu Dhabi’s asset management group. “By boosting the company’s balance sheet, it should make it easier for the company to fund its future ambitious projects.”

lbarnard@thenational.ae

Back to the top

More articles


Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Miele coffee maker making Cappuccino at Miele Gallery in Sama Tower in Dubai. The cost of this coffee maker is around Dh 17,000. Pawan Singh / The National

Space-age coffee comes at a price from Miele

Miele have taken the coffee machine to a new level with its Dh17,000 offering that is built into your kitchen.

 The bridge of Seajacks Hydra, as the wind farm installation vessel undergoes finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014. Jeffrey E Biteng / The National

In pictures: Building the Seajacks Hydra

The Seajacks Hydra, a wind farm installation vessel, is undergoing finishing touches and testing works at Lamprell’s Hamriyah facility in Sharjah before its planned delivery on June 2, 2014.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 The rush of new supply of hotel rooms pushed Dubai occupancy rates down to 87 per cent. Sarah Dea / The National

Dubai hotel room rates rise 10 per cent

The rush of new supply pushed occupancy rates down to 87 per cent, a dip of 2.6 per cent from the previous year. Winter months are the strongest for Dubai hotels, with occupancy and prices falling to half their peaks by July.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.

Events

To add your event to The National listings, click here

Get the most from The National