Flags of Emaar Properties fly in the Marina district of Dubai. The largest listed developer in Dubai plans to sell 25% of the unit to the public and list the business on the Dubai Financial Market in a deal expected to be worth around 8 to 9bn dirhams ($2.18-$2.45bn)

Reuters, Bloomberg/Dubai


The malls unit of Dubai’s Emaar Properties will hold meetings with fixed income investors ahead of a potential benchmark-sized sukuk issue, Emaar said yesterday, in what would be a debut debt market transaction for the subsidiary.
Dubai Islamic Bank, Emirates NBD, Mashreq, Morgan Stanley, First Gulf Bank , National Bank of Abu Dhabi, Noor Bank and Standard Chartered will be arranging the meetings on Emaar’s behalf, a statement to the Dubai bourse said.
Roadshows, which will be handled by two teams, will commence in the United Arab Emirates on June 8, before moving to Singapore and London on June 9, ending with investor meetings in Hong Kong and London on June 10, a source with direct knowledge of the matter said on condition of anonymity.
A maiden sukuk issue for the unit may follow, subject to market conditions. Benchmark size is traditionally understood to be worth at least $500mn.
The parent company has sold two sukuk previously, both worth $500mn. The latest deal, a seven-year trade issued in July 2012, was quoted in the secondary market to yield around 3.54% at a z-spread of 188.9 basis points at 1045 GMT, according to Thomson Reuters data.
Emaar Malls was making efforts to establish a “sustainable capital structure” in preparation for a stock market flotation later this year, Moody’s said on Monday when it assigned the firm a rating of Baa2, two notches above the parent’s score.
The largest listed developer in Dubai plans to sell 25% of the unit to the public and list the business on the Dubai Financial Market in a deal expected to be worth around 8 to 9bn dirhams ($2.18-$2.45bn).
Emaar Malls, which owns Dubai Mall, one of the largest shopping centres in the world, also intends to repay its external secured debt of 3.5bn dirhams and shareholder loans through a new 5.5bn dirham seven-year loan, the rating agency said.
That financing is being provided by five local lenders, sources told Reuters last week.
Dubai is booming after its recovery from near default in 2009. The emirate’s benchmark stock index gained 44% this year, the most globally, while passenger traffic at its international airport may beat London’s Heathrow this year.
Emaar’s mall and retail business posted a 20% increase in 2013 revenue to 2.84bn dirhams ($770mn), while its Dubai Mall, the world’s largest by area, attracted 75mn visitors last year.
The developer will use the newly-negotiated facility to help repay a $980mn conventional and Islamic loan from 2011, three bankers with knowledge of the matter said last week. The 2011 loan paid interest of 3.5 percentage points over Eibor, and was cut to 1.85 percentage points higher than the benchmark in September, according to MEED reports at the time.
“Emaar is benefiting from the low-interest-rate environment to raise funding,” Tariq Qaqish, who oversees the equivalent of $136mn as the head of asset management at Dubai-based Al Mal Capital PSC, said by phone on Wednesday. “The reduction in cost of funding will enhance Emaar’s bottom line.”
Emaar isn’t the only company to seek a better deal from banks. Abu Dhabi developer Aldar Properties said on Wednesday it repaid a $1.25bn bond that matured at the end of May, reducing its average cost of debt to 2.8% from 5.8%.
Borrowers are taking advantage of abundant liquidity at banks and a willingness among lenders to lower funding costs. The interest rate UAE banks use to lend to each other was at 0.73% on June 4, its lowest since at least September 2006, when Bloomberg began compiling the data.
“UAE banks are pretty liquid, having been reasonably conservative over the last few turbulent years,” Khalid Howladar, senior credit officer at Moody’s Investors Service, wrote in an e-mail. “They’re releasing some of that liquidity.”
DP World is in talks to cut the interest rate on a $2bn five-year loan to 125 basis points above the London interbank offered rate, down from 150 basis points, two people with knowledge of the matter said last week.
Syndicated lending in the Middle East and North Africa surged 26% in 2013 to $52.9bn, rebounding from a three-year low in 2012 as economic growth accelerated and credit conditions eased, according to data compiled by Bloomberg. Still, lending this year is about 57% down from a year earlier, with $9.4bn of loans arranged.