UPDATE 2-UAE’s Aldar to sell debut dirham Islamic bonds
By John Irish and Mohammed Abbas
DUBAI/MANAMA, May 22, (Reuters) – Aldar Properties, the United Arab Emirates’ second-largest property developer by market value, said on Thursday it had mandated banks for its debut dirham-denominated Islamic bond sale.
A three-day investor roadshow will begin on May 27, and will take in Abu Dhabi, Dubai, Bahrain and London, it said in a statement on the Dubai bourse website.
Two bankers arranging the sale, who declined to named, said it could range from benchmark size to $1.5 billion in value, depending on investor demand. Benchmark size varies from $500 million to $700 million.
Initial sale size and pricing details of the five-year bonds could be set on Wednesday, the bankers said.
Aldar’s Chief Financial Officer Shafqat Malik declined to outline sale value, but said it would be a benchmark issue. The company sold at least $2 billion in Islamic bonds in February last year.
“It’s for financing our projects; we have a huge pipeline,” Malik told Reuters.
The property firm, with about $65 billion of projects in the pipeline, has been raising funds to spearhead the Abu Dhabi government’s drive to develop residential and leisure districts in the world’s fifth-largest oil exporter.
Aldar is the latest borrower to return to the Islamic bond, or sukuk, market with a dirham issue after bond sales slowed in the second half of last year, following defaults on U.S. home loans and the ensuing global credit crunch.
Expectations that Gulf Arab states may revalue their dollar-pegged currencies to dampen soaring inflation has seen investors pile into Gulf securities denominated in local currencies, breathing life back into the sukuk market.
National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Barclays Capital, Credit Suisse, Dubai Islamic Bank, First Gulf Bank, Lehman Brothers and Noor Islamic Bank have been mandated as joint lead arrangers and bookrunners for the sale.
The bonds will be based on an ijara, or leasing structure. Islam bans interest, and bonds are based on physical assets such as property, which pays a rent to bondholders.
In April, the developer said it would sell 3.56 billion dirhams ($969 million) of convertible bonds to state-controlled investment firm Mubadala Development Co and agreed a $599 million Islamic lending facility from a group of UAE banks.
Standard and Poor’s Rating Services assigned the developer an A- long-term and A2 short-term corporate rating with a stable outlook, on April 25. (For Reuters content on Islamic finance, click on ISLAMIC) (Additional reporting by Stanley Carvalho in Abu Dhabi; Editing by Louise Ireland and David Hulmes)