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
0

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.


US poised to end waivers for 5 countries importing Iranian oil

Updated 22 April 2019
0

US poised to end waivers for 5 countries importing Iranian oil

  • Japan, South Korea, Turkey, China and India were exempted from sanctions until May 2
  • Since November, Italy, Greece and Taiwan have stopped importing oil from Iran

WASHINGTON: The Trump administration is poised to tell five nations, including allies Japan, South Korea and Turkey, that they will no longer be exempt from US sanctions if they continue to import oil from Iran, officials said Sunday.
Secretary of State Mike Pompeo plans to announce on Monday that the administration will not renew sanctions waivers for the five countries when they expire on May 2, three US officials said. The others are China and India.
It was not immediately clear if any of the five would be given additional time to wind down their purchases or if they would be subject to US sanctions on May 3 if they do not immediately halt imports of Iranian oil.
The officials were not authorized to discuss the matter publicly and spoke on condition of anonymity ahead of Pompeo’s announcement.
The decision not to extend the waivers, which was first reported by The Washington Post, was finalized on Friday by President Donald Trump, according to the officials. They said it is intended to further ramp up pressure on Iran by strangling the revenue it gets from oil exports.
The administration granted eight oil sanctions waivers when it re-imposed sanctions on Iran after Trump pulled the US out of the landmark 2015 nuclear deal. They were granted in part to give those countries more time to find alternate energy sources but also to prevent a shock to global oil markets from the sudden removal of Iranian crude.
US officials now say they do not expect any significant reduction in the supply of oil given production increases by other countries, including the US itself and Saudi Arabia.
Since November, three of the eight — Italy, Greece and Taiwan — have stopped importing oil from Iran. The other five, however, have not, and have lobbied for their waivers to be extended.
NATO ally Turkey has made perhaps the most public case for an extension, with senior officials telling their US counterparts that Iranian oil is critical to meeting their country’s energy needs. They have also made the case that as a neighbor of Iran, Turkey cannot be expected to completely close its economy to Iranian goods.