Staff Report
Dubai, UAE
Arada Developments, a Sharjah-based master developer, has announced the completion of issuing US$450 million sukuk, which was over-subscribed four-fold. Sukuk is a Shariah-compliant financial instrument that is equivalent to a bond. While bonds generate return as interest, sukuk guarantees a fixed return on investment earned from the asset it finances.
Arada’s sukuk issuance entails enough funds to tender offer of up to US$100 million on the developer’s existing sukuk maturing 2027, while the balance will be used for general corporate purposes.
Developers issue sukuk to raise funds as means to avert operational slowdown when inadequate financing is anticipated or fast-track their project building. This alternate form of debt collection enables investors to enjoy gains earned from the asset, a form of passive income which complies with Shariah or Islamic law.
Khaled bin Alwaleed bin Talal, Executive Vice Chairman of Arada, said, “Our latest successful return to the global markets reflects once again the trust being placed by regional and international investors in Arada’s track record, robust financial position and growth prospects. This issuance serves as a platform of our next phase of growth as we continue target growth opportunities both at home in the UAE and abroad.”
Arada’s five-year fixed rate RegS sukuk issuance, rated BB- by Fitch and B1 by Moody’s, was priced with a coupon of 7.150 percent, tightening 47.5 base points (bps) to 60bps from the initial price guidance of 7.625 percent to 7.750 percent for a spread of 317 bps over US Treasuries, for the tightest reoffer yield ever achieved by Arada.
It saw strong demand from both regional and international investors with a subscription order book peaking above US$2 billion (excluding joint lead managers), equivalent to over four times the offer size.
Investor interest for the sukuk was diversified geographically, coming from Europe, the Middle East, and Asia. The investors for this issuance include banks, private banks, asset and fund managers, and hedge funds.
The joint global coordinators for the sukuk were Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, Mashreq, and Standard Chartered Bank, while Arab Bank, Arqaam Capital, Bank ABC, RAK Bank, Sharjah Islamic Bank and Warba Bank acted as joint lead managers and bookrunners.
Since its launch in 2017, Arada has unveiled nine projects in both Sharjah and Dubai, and has a pipeline of existing and future projects in the UAE and Australia valued at over Dh90 billion. In total, Arada has sold over 17,000 units since inception, valued at over Dh29 billion, with over 10,000 units completed.
Ends
Also read: Arada awards Intermass Dh60 mn contract to build Masaar Central
