DUBAI Qatar's Barwa Real Estate (BRE) BRES.QA said on Monday it had agreed to sell its 37.34 percent stake in unlisted Barwa Bank for 2.39 billion riyals ($656 million) as part of a wider deal to help the property developer cope with its debt burden.
The deal, which still requires government approval, is part of an existing agreement with Qatari Diar, the real estate arm of Qatar's sovereign wealth fund. Under that agreement, BRE is selling some of its assets to Diar to help eliminate its debts, BRE said in a bourse filing.
BRE said in June that Diar, which owns 45 percent of BRE, would buy assets from it worth 26 billion riyals by the end of 2013, after BRE struggled to service debt taken on to fund its expansion.
BRE had liabilities worth 32.64 billion riyals on its books at the end of the third quarter of 2013, according to Thomson Reuters data, down from 50.47 billion riyals at the same point in 2012.
The developer has already taken a number of cost-cutting steps including the sale of assets in Qatar and Egypt, and redundancies.
The latest transaction will reflect positively in BRE's fourth-quarter results for 2013, Monday's statement said. The company's nine-month net profit was down 40 percent from a year earlier, it said in October.
BRE's problems come despite a massive building boom in the Gulf Arab state, as the government spends billions of dollars on new infrastructure and preparations to host the 2022 soccer World Cup.
BRE announced plans last May to build an island off the coast of Doha with luxury villas and five floating hotels to house fans during the tournament at a cost of $5.5 billion.
Barwa Bank is a sharia-compliant lender with assets worth 28.65 billion riyals as of last September, according to the latest financial statement on its website.
The bank has been planning to go public for some time, with CEO Steve Troop telling Reuters last April that it would offer 50 million shares to the public at a price of 21 riyals per share as one part of a 2.05 billion riyal share sale process - pending approval by the local regulator.
Initial public offers of shares have been rare in Qatar in recent years; the first since 2010 - a $880 million share sale by Mesaieed Petrochemical Holding Co - is due to be completed on Tuesday.
Qatar Holding, the main investment arm of sovereign fund Qatar Investment Authority, owns 12.1 percent of Barwa Bank, with the rest of the lender owned by several local individuals and corporations.
($1 = 3.6415 Qatar riyals)
(Reporting by David French; Editing by Andrew Torchia)