x Abu Dhabi, UAE Thursday 20 July 2017

Emaar weighs debt issuance as bond market gathers momentum

Emaar has hired advisers to prepare for a new debt issuance as the bond market picks up regionally.

Emaar Properties, the largest developer in the region, is testing the waters for a new debt issuance as the regional bond market builds up steam. The company said yesterday it had hired HSBC, Standard Chartered and Royal Bank of Scotland as advisers and was holding investor meetings in Asia and Europe.

Gulf debt markets were stalled for more than a year and a half after the global financial crisis and major corporate debt issues swept through the region. In September, the Dubai Government returned to the international capital markets with a programme of up to US$4 billion (Dh14.69bn) in new borrowing.

Analysts have said in recent weeks that the bond market could recover this year as confidence in some of the biggest companies improves.

While the property sector has been especially hard hit since late 2008, Emaar has emerged as one of the most resilient property developers in the Emirates. It managed to remain consistently profitable last year, boosted by its large recurring revenue assets such as hotels and shopping centres. Nomura Securities estimates Emaar will report a total Dh2.8bn in profit for last year, on revenues of Dh11.3bn. Emaar raised $500 million from issuing five-year bonds in September. Some of the money was used to pay contractors and the rest was used to convert part of its short-term debt into long-term debt. Still, the company has some balance-sheet issues, analysts say. It has not revalued its more than Dh800m investment in Amlak Finance, the mortgage lender that stopped issuing new loans more than two years ago. Emaar has also had difficulty with its joint venture in India, called Emaar MGF, which was supposed to sell stock to the public in 2009 but has run into roadblocks.

Both these investments could be written down early this year, analysts say. Emaar has also been quietly selling property in its Emaar Square development, near the Burj Khalifa in Dubai and Emaar Business Park near The Greens, also in Dubai, to raise money as it expands across the region.

Separately, Emaar's Saudi unit yesterday reported a widening loss in the fourth quarter. Emaar Economic City posted a 206.4 million Saudi riyals (Dh202.1m) loss compared with a loss of 69.9m riyals a year earlier.