Top Saudi builder's sukuk falls short

Riyadh: Saudi home builder Dar Al Arkan said it raised a lower-than-expected $450 million (Dh1.65 billion) from a sukuk sale that was priced at 10.75 per cent, the first issue from the region since Dubai's debt restructuring.

The five-year Islamic bond was the fourth issue from Saudi Arabia's biggest property developer by market value and the first international issue from the Gulf Arab region in 2010 since Dubai World announced plans on Nov-ember 25 to seek debt restructuring.

Bankers said Dar wanted to raise at least $500 million and up to $700 million. A banking source told Reuters on Thursday that the new sukuk was priced at 11 per cent.

Dar wants to use proceeds from the latest sukuk to finance 2.7 billion Saudi riyals (Dh2.64 billion) of capital expenditure during 2010, a prospectus for investors showed.

Standard and Poor's assigned in January a BB- to both Dar Al Arkan's long-term rating and to its sukuk issue which it said will be for an amount in line with previous issuance.

Bankers said they expected the new bond to be used to refinance a $600 million sukuk due in mid-February.

There had been speculation the sale could be delayed due to the market turbulence caused by Greece's fiscal woes that have hit emerging markets.

The bond was also the first 144a bond issued by a Saudi firm.

There has been an increase in Gulf Arab corporate and quasi-sovereign issuers opting for 144a types of issues, which are regulated by the US Securities and Exchange Commission allowing US investors to buy into the issue.

Deutsche Bank, Goldman Sachs and Unicorn Investment Bank arranged the sale.

The roadshow for the bond was held in the Middle East, Europe, Asia and the United States.

Before this issue, Dar's total borrowings rose to 8.35 billion riyals in 2009, up from 7.64 billion riyals in 2008.

The firm will have to repay 2.7 billion riyals before the end of 2010, its financial statements showed. It will also need to repay 600 million in 2011 and 5.05 billion riyals between 2012 and 2014.