MIDEAST DEBT - Emaar Malls sukuk may price inside peers

Tue Jun 10, 2014 9:49am EDT

Related Topics

* Debut sukuk seen pricing around 175 bps over midswaps

* May come in tighter than Majid Al Futtaim

* Order books over $2 bln within hours of announcement

* Retail sector avoids some of Dubai's property risk

* Expected to price on Wednesday

By Archana Narayanan

DUBAI, June 10 (Reuters) - Emaar Malls Group, a unit of Dubai's Emaar Properties, may price its debut sukuk on Wednesday inside comparable bonds as investors seek exposure to the emirate's booming retail sector.

Bankers think Emaar Malls, which also plans an initial public offer of shares in coming months, will issue up to $1 billion of 10-year wakala sukuk. Normally, a first-time issuer might expect to pay some kind of pricing premium, but that doesn't look likely in this case.

By late Tuesday, indicative pricing had already tightened to 190 basis points over midswaps from initial pricing thoughts of 200 bps over, with investor demand said to be very strong.

"As I understand, books are already in the $2 billion plus range. My expectation would be a spread of around 175 bps," said Biswajit Dasgupta, chief investment officer at Emirates Investment Bank.

The firm owns Dubai Mall, one of the world's largest shopping centres, which says it attracted over 75 million visitors last year. That makes it a play on Dubai's retail, tourism and food & beverage booms - and arguably a less risky bet than its parent, which is involved in the emirate's volatile residential real estate market.

Emaar Malls is making efforts to establish a "sustainable capital structure" in preparation for its stock market flotation, Moody's said last week when it assigned the firm a credit rating of Baa2, two notches above the parent's score.

"We are comfortable with the credit. It's really a one-asset company right now, but that asset, Dubai Mall, is an excellent one. Plus the company is committed to maintaining investment grade ratings, which is an additional source of comfort," said Abdul Kadir Hussain, chief executive at Mashreq Capital.

COMPARABLES

Traders see two possible comparables for the Emaar Malls issue. One is United Arab Emirates malls developer Majid Al Futtaim Holding, which issued a $500 million, 10-year conventional bond in April at a spread of 195 bps over midswaps; the bond was trading at 180 bps over its Z-spread on Tuesday.

Majid Al Futtaim is rated in line with Emaar Malls, and investors may bid the latter up higher because of a lack of issuance in the Gulf during recent weeks, which has left cash-rich funds scrambling to buy paper before the Ramadan and summer lulls begin at the end of this month.

The other possible comparable is Investment Corporation of Dubai, the emirate's state investment arm, which owns 29 perecent of Emaar Properties. It issued a $300 million, 10-year conventional bond in mid-May at 210 bps over midswaps; it is now trading at about 185 bps over its Z-spread.

Ten banks are bookrunning the deal: Dubai Islamic Bank , Emirates NBD, Mashreq, Morgan Stanley, First Gulf Bank, National Bank of Abu Dhabi, Noor Bank, Standard Chartered, Al Hilal Bank and Abu Dhabi Islamic Bank. (Editing by Andrew Torchia)

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