x Abu Dhabi, UAESunday 23 July 2017

Dubai Investments revives plan to issue $300m sukuk

Dubai Investments, which holds stakes in more than 40 businesses from property to glass, is reviving a sale of Islamic debt after an emerging-market rout forced it to delay the offer, its chief executive officer said.

Dubai Investments, which holds stakes in more than 40 businesses from property to glass, is reviving a sale of Islamic debt after an emerging-market rout forced it to delay the offer, its chief executive officer said.

A unit of the Dubai-based company obtained a credit rating from Standard & Poor's, allowing it to target lower borrowing costs, Khalid bin Kalban said by phone on July 15. Sukuk sales in the Arabian Gulf plunged last month after Federal Reserve Chairman Ben Bernanke suggested the regulator may start trimming its bond-buying programme if the US economy improves.

Yields on Gulf Cooperation Council Shariah-compliant bonds, which jumped to a 16-month high of 4.23 per cent on June 26, according to HSBC/Nasdaq Dubai indexes, have since fallen to 3.77 per cent on Tuesday after Mr Bernanke pledged stimulus would remain accommodative. That compares with a yield of 4.1 per cent for non-Islamic debt.

"We were supposed to issue in May or June, but the cost of funding rose," Mr Kalban said in a phone interview. "Now we'll come back to the market with a rating and a planned listing, and hopefully get a better profit rate."

Some Dubai issuers have not been compelled to seek credit ratings as demand for GCC securities pushed Shariah-compliant yields to record lows and drove sales to an all-time high in 2012. Sukuk offerings in the six-nation bloc stalled in June, with no sales taking place for the first time in 10 months, according to data compiled by Bloomberg. Only Saudi Binladin Group has sold Islamic debt so far this month, with its one-year 1 billion Saudi riyal private placement.

Standard & Poor's gave Dubai Investments Park Development a BB rating, two levels below investment grade, on July 8. The wholly owned subsidiary plans to issue around US$300 million of five-year sukuk to help refinance debt and invest in an industrial park, Mr Kalban said.

"With the rating, we hope we can get the profit rate below 5 per cent," he said. "There's still an appetite in the market for sukuk, so we are confident."

 

* Bloomberg News