Emirates Reit said on Wednesday it received bids worth $1.1 billion for $400 5-year sukuk, which was oversubscribed 2.5 times by 90 global investors.
The debut sukuk was with a profit rate of 5.125 per cent per annum or with a credit spread of 291 basis points over the mid-swap rate, the Reit said in an emailed statement. “
“Investor demand for the Sukuk was strong, reflecting the Reit ’s robust business profile. Investors recognised the Reit ’s high quality assets and long term stable cash flows, as well as the management’s ability to implement its business strategy,” Emirates Reit said in a statement.
About more than a half was issued to international investors, while the remaining went into UAE accounts. In terms of investor type, 48 per cent were banks, 35 per cent were fund managers, 11 per cent were private banks, 3 per cent hedge funds and 2 per cent insurance companies and pension funds.
The proceeds will be used to refinance Emirates Reit ’s existing debt and replace amortising loans with bullet funding, resulting in an increase of free cash flows by approximately $30 million per year.
Positive for shareholders:
Analysts expect the sukuk issue will help Emirates Reit to better manage its balance sheet before Fed announces more rate hikes.
“We see Emirates Reit raising $400 million at 5.125 per cent as a positive for shareholders as it offers the company tools to better manage its balance sheet due to long- term fixed financing and as we expect higher interest rates, going ahead, on Fed hikes,” said Ankit Gupta, Vice President Investment Management at Shuaa.
“This will set a new benchmark for the GCC Reit framework, specifically as we believe that the financing rate broadly reflects a level equivalent to the swap rate plus margin paid by the company on its current debt obligations. If we were to assume that all of $337 million debt on Reit’s balance sheet as of September 2017 will be refinanced with this Sukuk, it translates into approximately 45 per cent loan- to- value (LTV) compared to a regulatory cap of 50 per cent. At 45 per cent LTV, the company has a fire power to acquire new assets worth $90-95 million,” Gupta added.