Emirates REIT holds prime assets in the DIFC cluster and elsewhere, but these have been underperforming amidst uncertain market conditions. Image Credit: Gulf News Archive

Dubai: The final stretch is in sight for what is turning out to be one of the most intense battle of wits in the UAE’s corporate landscape.

Equitativa, the operator of the Emirates REIT property fund, says it has swung enough investors in favour of its plan to issue new Sukuk certificates to replace the current ones for a $400 million debt issue. And that by June 9, which is the deadline for the submission for the consent, it will have the majority.

Now, opposing this view is the Ad Hoc Group, which features some of the biggest names in the local and international investor space, which says that together they currently constitute 33 per cent of the investor base in the $400 million Sukuk. They are also looking to swing enough of the undecided to join in opposing Equitativa’s move.

Even otherwise, the 30 per cent plus combined strength gives the Group a “blocking position”. Plus, a “majority of certificate-holders – 55 per cent (with only 75 per cent of the 60 per cent of certificate-holders who have voted to date in favour) – remain opposed or have yet to vote, demonstrating the lack of support for the consent solicitation despite the deal being structured to incentivise early voting,” the Group said in a statement issued Monday.

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What’s the fracas about?

Equitativa wants to extend the maturity terms of its 2017 Sukuk offer through the new certificates, which would be in 2024 as opposed to the earlier one’s 2022 schedule. Equitativa has retained the profit rate at 5.25 per cent and will also grant them ‘secured’ status.

But the Ad Hoc Group members are not convinced. In particular, they oppose the decision to:

• Extend the maturity from December 2022 to December 2024, “without any explanation of the company’s liquidity profile or its ability to repay the sukuk at the proposed maturity”;

* Defer coupon payments for June 2021 and December 2021, amounting to $20.5 million, with such amount being paid at maturity in December 2024. “No interest is being offered to certificate-holders on such amount during the deferral period,” the Ad Hoc Group says. Not just that, “Equitativa manager, is intending to continue to pay itself significant management fees in 2021, while certificate-holders would not be paid any coupon under the company’s proposal.”

Find common ground?
The Ad-Hoc Group would "welcome" any move by Equitativa and its advisors to "work alongside the Group’s financial and legal advisors to develop revised proposals";

The Ad-Hoc Group is "disappointed" and "surprised" by the approach the company has taken thus far, notably the "lack of willingness to engage in a conventional negotiation over terms with its investors, as would be typical in such a situation;

The Group also believes that the improvements to governance and mitigating actions to cash leakage would be to the benefit of all shareholders and sukuk certificate-holders.