Analysts fear it might have to raise new debt but the
company, which had SR1.1 billion ($293 million) in cash at the end of the third
quarter, says it is confident that it can generate sufficient cash to pay off
the existing debt.
"From next year until the maturity of the debt in 2012
you will find more cash in our balance sheet," Dar Al-Arkan's Director
General Saud Al-Gusaiyer said on Monday, adding that land sales were possible.
"The cash the company can create in 2011 and 2012 is
enough to pay our debts, our expenses and capital expenditure. I will generate
this cash from renting some assets — and we expect to generate SR300 million in
2011 — and also selling houses and selling land," Al-Gusaiyer said.
"We are not planning to raise debt to pay our old debt.
We are not even thinking about it," he added.
Dar Al-Arkan's 2012 sukuk last traded at 82 percent of par
value, according to Thomson Reuters data, the price having fallen 7 percent
last week, the fifth-biggest loss amongst regional bonds after the company
reported a 53 percent fall in third-quarter net profit that triggered a cut by
rating agency Moody's.
In February Dar Al-Arkan raised $450 million from a sukuk
issue that had a five-year maturity and was priced at 10.75 percent just in
time to refinance a $600 million sukuk maturing in March.
Bankers said Dar Al-Arkan raised less than it had targeted
after a lengthy road-show.
Up to $100 billion in corporate debt needs to be refinanced
in the Gulf Arab region in 2011, making it harder to refinance debt maturing
afterward.
At the same time Bahrain-based investment house Arcapita
needs to refinance a $1.1 billion debt maturing in April 2012, that has been
trading at between 70 and 90 cents to the dollar.
"Maybe they have investments and other choices to
liquidate, but for sure they will liquidate some kind of assets to pay back the
sukuk," said Hisham Tuffaha, head of research at Saudi investment bank
Bakheet Investment Group in Riyadh.
Dar Al-Arkan has told investors it would go "the extra
mile" to fulfil debt commitments, yet the shares have fallen 27 percent
since July on concerns that it may have to make asset sales.
Some 80 percent of Dar Al-Arkan's assets of about SR23
billion ($6.13 billion) are land plots in the Kingdom where analysts say
properties are hard to value.
"The company's policy of not disclosing the details of
its land bank is in contrast to disclosure practices of regional peers, and is
the key risk and concern of investors in our view," Ambereen Jiwani, an
analyst at Bahrain-based Securities and Investment Company (SICO) said in a
recent research note.
But Al-Gusaiyer said that the real estate market in Saudi
Arabia was strong and that Dar Al-Arkan would not face any price pressures.
"The market is good and we have assets that are needed
by the market and we can liquidate them at a very good margin. So we are not
facing any problems to create cash," he said.
