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Monday, September 20, 2021

Emirates REIT saga: Dubai property fund’s manager rejects opposing group’s demand

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Emirates REIT
The Index Tower at DIFC is the flagship of the Emirates REIT portfolio. But the last two years have been difficult for the fund, which closed 2020 with losses of Dh897 million.
Image Credit: Gulf News archives

Dubai: The Dubai property fund Emirates REIT’s manager has issued its strongest statement yet on the unfolding Sukuk saga and the investor group that was set up to oppose the company’s plan of action.

“While a minority group has been formed, the company does not believe it is reflective of the Sukuk holder group as a whole, many of which have already voted in favour of the offer,” the fund manager Equitativa said in a statement early on Tuesday. “The board rejects the minority group’s demand for Emirates REIT to pay for their legal and financial advisory fees – services which the group independently sought.”

Clearly, the battle-lines are hardening on what’s turning out to be one of the most high-profile corporate fracas in recent times. And Equitativa says it has the numbers already in place to go ahead with its original plan of action.

Extend the Sukuk

At the heart of this particular battle of attrition is the decision by Emirates REIT to seek investor approval to issue new Sukuk certificates that would mature in late 2024. The original Sukuk of $400 million was issued in 2017.

Emirates REIT had provided a few ‘sweeteners’ for investors to get interested in the new certificates. But an ‘Ad Hoc Group’ of investors in the original Sukuk had raised objections and are trying to drum up enough support to derail the plan.

The deadline for submission of the consent form is June 7.

“As of 26 May, close to 60 per cent of the sukuk holders had cast their vote, with more than 75 per cent of those votes in favour of the Consent Solicitation Memorandum (CSM) presented,” said the statement. “The CSM is a voluntarily proposed transaction that is designed to provide sukuk holders with the opportunity to exchange an unsecured sukuk for a new secured sukuk on a dollar-for-dollar basis.

“The company is providing all available security to the Sukuk holders as part of this exchange. The company has also proposed to maintain the existing 5.125 per cent profit rate for the new secured sukuk.”

Funds in place

Emirates REIT says it has the “sufficient liquidity” to meet an upcoming Sukuk profit distribution “if required”.

Not possible

“While we welcome the minority Sukuk group’s participation in the offer, to date it has not yet provided any detailed or specific amendments to the transaction that will benefit the long-term growth of  the company and both its debt and equity shareholders as a whole,” said Arun Reddy, Managing Director at the investment bank Houlihan Lokey, which is advising Emirates REIT.

“We regard the proposal put forward to certificate holders as a very straightforward and voluntary amend-and-extend transaction, which has been fairly and explicitly designed with the interests of Sukuk holders in mind. The fact that the Sukuk has rallied 8 basis points, or 12 per cent, to 70 pts (as of May 27) vs 62 pts (as of May 17) since we tabled our proposal shows the market is both supportive and positive on the transaction.”

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