Real Estate: Deal of the Year
Emaar Sukuk, a subsidiary of Emaar Properties, sold US$750 million Registered S Senior Unsecured Sukuk in September 2016 to fund its upcoming projects worth billions. DURGAHYENI MOHGANA SELVAM provides an account of the developer’s Sukuk.
The issuance, falling under Emaar’s US$2 billion Trust Certificate Program, was the company’s successful comeback to the international capital market after an absence of four years. The issuance continues to prop NASDAQ Dubai as the world’s largest Sukuk listing center by value, simultaneously becoming among the top three Sukuk issuers in September 2016.
The deal, maturing on the 15th September 2026, is managed by Arab Banking Corporation, Dubai Islamic Bank, Emirates NBD, First Gulf Bank, Mashreqbank, National Bank of Abu Dhabi, Noor Bank, Standard Chartered Bank and Union National Bank. Standard Chartered were selected as the deal’s sole coordinator, with the bank’s Shariah Supervisory Committee also acting as the deal’s Shariah advisor.
The issuance levied heavily on the scarcity value GCC was facing in the third quarter of 2016, as there were not many noticeable investment grade corporate Sukuk supply in the region at the time. This brought the attention of investors, domestic and international alike, to purchase and participate in this issuance. The investors distribution for this deal were banks (57%), fund managers (33%), insurance firms and agencies (7%), hedge funds (2%) and others (1%).
The deal was issued in the wake of a three days meeting with investors from Europe and Asia, particularly the Middle East on the 4th September 2016. The deal was initially planned at low to mid 200bps over midswaps. It was then revised and fixed at 3.635% with a spread of 235bps over midswaps plus or minus 5bps. This price was one of the most competitive among the other issuers at that time. The other notable issuers were Majid Al Futtaim Properties which was trading at 239bps and Dubai International Financial Center was quoted at 230bp on the day of Emaar’s issuance. The deal’s final book size was evaluated at US$2.3 billion, giving Emaar the opportunity to size the deal at US$500 million to US$750 million, well inside its target. The deal was subscribed by investors from MENA (65%), Europe (18%), Asia (14%) and the US (3%).
Emaar’s decision to finance future projects through Sukuk was based on the company’s previous experience and subsequent success. In July 2016, the company said that it had projects worth US$12.49 billion for the next three to four years. In 2014, Emaar’s high-rated subsidiary, Emaar Malls Group, raised US$750 million from a debut Sukuk sale. The parent company, Emaar Properties, issued Sukuk with a total profit of US$4.65 billion in 2012. The success of both issuances contributed to the financing of Emaar’s high end projects such as the Address Residences Dubai Opera and II Primo towers in Downtown Dubai; and the Fairway Vistas and the Sidra villas communities in Dubai Hills.
The success of this deal and the steady presence of Emaar in the global capital market are believed to serve as a sound platform for further traffic into the Sukuk in upcoming years.
Summary of terms & conditions |
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Issuer |
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Obligor |
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Size of Issue |
US$750 million |
Mode of Issue |
Regulation S Senior Unsecured Sukuk |
Purpose |
To finance future projects |
Tenor |
10 years |
Issuance price |
100% |
Profit rate |
3.635% |
Payment |
Semi-annually in arrears on the 15th March and 15th September each year until maturity date |
Currency |
US Dollars |
Maturity date |
15th September 2026 |
Lead manager(s) |
Arab Banking Corporation, Dubai Islamic Bank, Emirates NBD, First Gulf Bank, Mashreqbank, National Bank of Abu Dhabi, Noor Bank, Standard Chartered Bank, Union National Bank |
Bookrunner(s) |
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Governing law |
Cayman Islands |
Legal Advisor(s) / Counsel |
Maples and Calder (Dubai), Linklaters, Allen & Overy |
Listing |
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Underlying Assets |
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Rating |
Moody’s: ‘Baa3’ S&P: ‘BBB-’ |
Shariah advisor(s) |
Shariah Supervisory Committee of Standard Chartered Bank |
Structure |
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Tradability |
Yes |
Investor breakdown |
Asia, Europe |