Dubai property developers put bond plans on hold -sources

The corporate logo of EMAAR is seen in Dubai, United Arab Emirates, December 28, 2018. (Reuters)
Updated 21 January 2019

Dubai property developers put bond plans on hold -sources

  • Sources say firms had planned Islamic bonds
  • Emaar says bond on hold due to rising interest rates

DUBAI: Dubai’s Emaar Properties and state-owned developer Nakheel have put plans to issue US dollar-denominated bonds on hold, Emaar and sources familiar with the bond issues said.
The firms had planned dollar-denominated sukuk, or Islamic bonds, and would have had to pay a yield premium to attract enough investors due to concerns about Dubai’s property price slide and emerging market volatility, three sources said.
Emaar, developer of the world’s tallest building Burj Khalifa, said it had put on hold a planned bond issue, blaming rising interest rates, while Nakheel declined to comment.
Dubai property prices have fallen since a mid-2014 peak, hurt by weaker oil prices and muted sales, although the slide has not come close to the more than 50 percent drop in 2009-2010, which pushed Dubai close to a debt default.
Residential prices fell 6 to 10 percent in 2018 and are expected to drop 5 to 10 percent more this year, Savills says.
This has hit earnings, with a 29 percent fall in Emaar’s third quarter last year and a 68 percent drop at Dubai’s second-largest listed developer DAMAC.
The financial sources said Emaar and Nakheel hired banks a few months ago to issue Islamic bonds but shelved the plans.
“The bond was considered more than a year ago and was put on hold due to increasing interest rates. The decision was not based on market conditions,” a spokesperson for Emaar, which is partly owned by Dubai’s government, said.

YIELDS RISE
Nakheel, developer of palm shaped islands off Dubai, was one of the worst hit by Dubai’s 2009-2010 real estate crash, forcing it into a massive debt restructuring. It has not issued public debt since it nearly defaulted in 2009.
The market downturn has put pressure on property companies’ existing bonds, which investors use to establish the price of new debt sales. Yields of bonds issued by Dubai developers have risen sharply in recent months, underperforming other sectors.
Yields on DAMAC’s $500 million sukuk due in 2022 and $400 million Islamic paper due in 2023 have spiked since early November by more than 200 basis points (bps) and 150 bps respectively.
BofA Merrill Lynch last week forecast weaker booked sales and gross margin for DAMAC, saying it was likely to be pressured by the property market and upcoming debt and land payments.
Amr Aboushaban, DAMAC’s head of investor relations, said it is comfortable it will meet its debt commitments when they are due and continues to have strong liquidity.
“Market conditions are expected to improve in the next two years, ahead of our 2022 and 2023 maturities and we remain conservative from a leverage perspective,” he told Reuters.


Electric luxury vehicles, SUVs ‘more likely to cause accidents’

Updated 23 August 2019

Electric luxury vehicles, SUVs ‘more likely to cause accidents’

  • As EV sales rise, French insurer AXA warns that drivers are struggling to adapt to cars’ rapid acceleration

LONDON: Electric luxury cars and sport utility vehicles (SUVs) may be 40 percent more likely to cause accidents than their standard engine counterparts, possibly because drivers are still getting used to their quick acceleration, French insurer AXA said.

The numbers, based on initial trends from claims data and not statistically significant, also suggest small and micro electric cars are slightly less likely to cause accidents than their combustion engine counterparts, AXA said at a crash test demonstration on Thursday.

AXA regularly carries out crash tests for vehicles. This year’s tests, which took place at a disused airport, focused on electric cars.

Overall accident rates for electric vehicles are about the same as for regular cars, according to liability insurance claims data for “7,000 year risks” — on 1,000 autos on the road for seven years — said Bettina Zahnd, head of accident research and prevention at AXA Switzerland.

“We saw that in the micro and small-car classes slightly fewer accidents are caused by electric autos. If you look at the luxury and SUV classes, however, we see 40 percent more accidents with electric vehicles,” Zahnd said.

“We, of course, have thought about what causes this and acceleration is certainly a topic.”

Electric cars accelerate not only quickly, but also equally strongly no matter how high the revolutions per minute, which means drivers can find themselves going faster than they intended.

FASTFACT

Accident rates among luxury and SUV electric vehicles are 40 percent higher than for their combustion engine counterparts.

Half of electric car drivers in a survey this year by AXA had to adjust their driving to reflect the new acceleration and braking characteristics.

“Maximum acceleration is available immediately, while it takes a moment for internal combustion engines with even strong horsepower to reach maximum acceleration. That places new demands on drivers,” Zahnd said.

Sales of electric cars are on the rise as charging infrastructure improves and prices come down.

Electric vehicles accounted for less than 1 percent of cars on the road in Switzerland and Germany last year, but made up 1.8 percent of Swiss new car sales, or 6.6 percent including hybrids, AXA said.

Accidents with electric cars are just about as dangerous for people inside as with standard vehicles, AXA said. The cars are subject to the same tests and have the same passive safety features such as airbags and seatbelts.

But another AXA survey showed most people do not know how to react if they come across an electric vehicle crash scene.

While most factors are the same — securing the scene, alerting rescue teams and providing first aid — it said helpers should also try to ensure the electric motor is turned off. This is particularly important because unlike an internal combustion engine the motor makes no noise. In serious crashes, electric autos’ high-voltage power plants automatically shut down, AXA noted, but damaged batteries can catch fire up to 48 hours after a crash, making it more difficult to deal with the aftermath of
an accident.

For one head-on crash test on Thursday, AXA teams removed an electric car’s batteries to reduce the risk of them catching fire, which could create intense heat and toxic fumes.

Zahnd said that studies in Europe had not replicated US findings that silent electric vehicles are as much as two-thirds more likely to cause accidents with pedestrians or cyclists.

She said the jury was still out on how crash data would affect the cost of insuring electric versus standard vehicles, noting this always reflected factors around both driver and car.

“If I look around Switzerland, there are lots of insurers that even give discounts for electric autos because one would like to promote electric cars,” she said.