Dubai’s Emirates REIT withdraws plan to offer new Sukuk certificates; will focus on capital restructure

Stock Index Tower - Emirates REIT
The Emirates REIT owned Index Tower at DIFC… The fund will soon need to come up with a Plan B on the restructuring efforts after failing to muster enough investor support on the bond maturity extension. Image Credit: Ahmed Ramzan/Gulf News

Dubai: The fund manager of Dubai’s Emirates REIT has decided to withdraw the proposal to issue new Sukuk certificates to replace those for its 2017 $400 million debt offer. The initial plan had drawn significant opposition from a group of investors in the Sukuk, in particular over the two-year extension – December 2024 – the new certificates would have meant.

“We will continue to reflect on feedback from the market and work with the company (Equitativa) with the aim of addressing the structural issues we observe in the Sukuk and equity instruments within the capital structure,” said Arun Reddy, Managing Director at the investment bank Houlihan Lokey, which was advising to Emirates REIT on the plans.

“I believe the company proactively and voluntarily put forward a straightforward transaction which was fairly and explicitly designed to enhance the tradability of the Sukuk.”

The Equitativa – which is the fund manager – move comes just hours before the deadline expires for the Sukuk investors to give their consent or otherwise to the new certificate plan. The original plan was for the company to issue new certificates with the December 2024 maturity date rather than the current ones’ December 2022.

Ad Hoc Group

An Ad Hoc Group was formed, representing those investor who were opposed to the plan. Last week, the Group said they had 40 per cent backing, while Equitativa laid claim on 45 per cent at that point. It was all boiling down to which side could carry off the undecideds before the June 7 cutoff point. 

“The fact that the Sukuk rallied 12 per cent over the offer period and that a clear majority of Sukuk holders voted in favour, is a sign of the appealing nature of the transaction,” said Reddy.

A reset

Equitativa and Houlihan Lokey will have their work cut out in coming up with the options. Emirates REIT had recorded losses of just under Dh900 million in 2020, and it might look to some disposals from its property portfolio – which includes the Index Tower in DIFC – to raise new funds.

No question of default

In the new statement, Emirates REIT said there has been no “default” or any “dissolution event” with its debt. The company also confirmed that it will pay its upcoming Sukuk profit distribution in June.

Majority claim?

In its statement, Emirates REIT said it had sewn up a majority support from its Sukuk investors. “A clear majority of voting Sukuk holders (57 per cent) had voted in favour of Consent Solicitation Memorandum (CSM),” a statement said. “But support remained short of the special majority threshold of 75 per cent needed for the exchange offer to proceed.

“Overall, 79 per cent of all Sukuk holders voted in the CSM process.”