Damac plans to raise US$500m through five-year sukuk

By Davide Scigliuzzo

LONDON, March 27 (IFR) - Dubai's Damac Real Estate will begin investor meetings on Friday ahead of its potential debut sukuk offering, a closely watched deal in the emirate's crowded property market.

The luxury real estate developer is expected to raise US$500m through the five-year note, according to Standard & Poor's, which has assigned a preliminary rating of BB to the issue.

It will begin a three-day roadshow in Singapore on March 28, before moving to the UAE on March 30 and London on March 31.

"Cashflows are likely to be 'strong' for the time being, meaning this year and next, and for now Damac is a negative-net-debt credit," said Richard Segal, fixed-income analyst at Jefferies.

Investors gauging fair value for the new issue will likely look at sukuk issued by other property companies in the UAE, such as Emaar Properties, Aldar Properties and Dubai Investment Park.

"While the real estate market in Dubai is presently robust, some are debating whether bubble-like conditions exist again. Bubbles can only be determined in retrospect, but it does seem clear that the sector is at least relatively close to a cyclical peak," Segal added.

Emaar's 6.4% US$500m 2019s were quoted at a Z (Other OTC: ZHLD - news) -spread of 201bp on Thursday morning, according to a banker close to the deal. He had Aldar's 4.348% US$750m 2018s quoted at a Z-spread of 220bp and DIP's 4.291% US$300m 2019s at 250bp over.

The company has appointed Barclays (LSE: BARC.L - news) , Citigroup (NYSE: C - news) , and Deutsche Bank as joint global co-ordinators, as well as joint lead managers with Abu Dhabi Islamic Bank PJSC, Dubai Islamic Bank PJSC, Emirates NBD Capital and National Bank (NYSE: NBHC - news) of Abu Dhabi to arrange the meetings.

Last year the company sold GDRs on the LSE, raising US$348m, less than the US$500m it had initially targeted. The share sale put a value of US$2.65bn on Damac, which was the first Dubai property developer to list in London.

The new notes will be issued by special purpose vehicle Alpha Star Holding Ltd, S&P said. (Reporting by Davide Scigliuzzo; Editing by Sudip Roy and Luzette Strauss)