$ 750 m sukuk: Saudi developer closes 1st tranche

Updated 26 May 2013
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$ 750 m sukuk: Saudi developer closes 1st tranche

Bank Alkhair has announced the successful close of the first tranche of a $ 750 million sukuk program established by Dar Al Al-Arkan Real estate Development Company (Dar Al-Arkan), a major residential real estate developer in Saudi Arabia.
Bank Alkhair jointly led the sukuk program, which is based on the Islamic Wakala structure. The program was established to fund Dar Al-Arkan’s current and upcoming development projects. Bank Alkhair also acted as the Shariah adviser of the program.
The first issue, a benchmark sized, 5-year, Regulation S issue (Reg S), was offered to the market on May 20. The sukuk, which offers investors a coupon of 5.75 percent, received an overwhelming response from regional and international investors and was significantly oversubscribed. Dar Al-Arkan opted to close the first issue at $ 450 million on May 21, despite it being almost 4 times oversubscribed, with overall book order reaching up to $ 1.68 billion.
Bank Alkhair, Deustche Bank, Goldman Sachs and Emirates NBD Capital were the joint bookrunners of the transaction.
Commenting on the successful close of the first tranche, Ikbal Daredia, head of Bank Alkhair’s global capital markets division, said: "The oversubscription of the issue demonstrates increasing investor appetite for sukuk and for quality issuers like Dar Al-Arkan."
Yousef Al-Shelash, chairman of Dar Al-Arkan, said: "The success of this sukuk issue is a testament to investor confidence in Dar Al-Arkan’s solid business model and Saudi Arabia’s robust economy."
Standard & Poor's Ratings Service is expected to assign a rating of "B+" to the issue. Standard & Poor’s recently affirmed Dar Al-Arkan’s B+ credit rating and revised its outlook to positive from stable due to the company’s resilient operating performance.
The sukuk, which was issued through the Dar Al-Arkan Sukuk Company Ltd., marks Dar Al-Arkan's fourth international sukuk issue to date.


Is the Dubai economy turning the corner?

Updated 3 min 31 sec ago
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Is the Dubai economy turning the corner?

  • Expo 2020 expected to boost GDP
  • Relaxation of residency rules helps real estate

LONDON: Is the Dubai economy finally turning the corner? At least one major international bank thinks so.

It follows a move by the emirate's leadership to reboot an economy that has been hit hard by corporate job losses, the introduction of VAT and a slowing real estate sector.

The UAE’s non-oil economy is likely to “turn a corner” next year with Dubai’s Expo 2020 infrastructure projects, changes to visa rules and increased government spending set to boost growth, according to a Bank of America Merrill Lynch (BofAML) research note.

Abu Dhabi National Oil Company’s (ADNOC) downstream expansion plans are also expected to drive the country’s non-oil GDP growth, said the note compiled by Middle East and North Africa (MENA) economist Jean Michel Saliba.

The Gulf country’s real GDP growth is estimated to rise to 3.5 percent in 2019 from a forecast 2.8 percent increase this year and a 1.9 percent increase in 2017, said the note published on Thursday.

Buoyed by a recovery in oil prices, Abu Dhabi approved a 50 billion dirham ($13.6 billion) three-year stimulus package in early June, which BofAML estimated could add 0.4 percentage points to non-oil GDP growth.

ADNOC’s $45 billion five-year downstream investment plan — revealed in May — is estimated to add a further 1.1 percentage point to the emirate’s non-oil growth, the report said.

The Expo 2020 event in Dubai could drive up GDP growth by 2 percentage points between 2020 and 2021, the report said, by boosting job creation, consumption and tourist numbers.

Given the improvement in oil prices, the cost of Abu Dhabi’s stimulus spending is considered “financeable” by BofAML, while Dubai’s spending plans are said to be “modest.”

Recent structural reforms, including plans to introduce long-term expatriate visas for up to 10 years, could help to boost the UAE’s population and consumer demand, the note said.

“The new UAE long-term and temporary visa system should facilitate retention of white-collar expatriates,” it said.

“As we expect longer-term visas not to be linked to continued employment, this may increase expatriate incentives to acquire property and support real estate demand.”

The UAE announced in May that it would allow 100 percent foreign ownership of UAE companies in specific industries by the end of the year, a move that could give a welcome boost to foreign direct investment in the country.

A new UAE-wide insurance scheme may provide a one-time boost to corporate profits, the note said.

The UAE cabinet approved plans in June for the insurance scheme to replace the previous system whereby employers had to provide a monetary guarantee to cover each of their workforce.

The move is likely to free up capital that companies could choose to sit on or to reinvest, BofAML said.

“Should corporates invest, we estimate this could lead to a one-off 0.1percentage point boost to UAE non-hydrocarbon real GDP growth,” the report said.