Amlak Said to Seek Extension on $2 Billion Debt: Islamic Finance

Islamic mortgage provider Amlak Finance PJSC is proposing to extend the maturity on more than $2 billion of loans to creditors, two people familiar with the plan said, as a series of Dubai debt restructurings reach conclusion.

Amlak is looking to push the due date forward by 15 years and reduce the amount of the loans by 30 percent, according to the people, who asked not to be identified because the details are private. The Dubai-based company is awaiting a formal response from a committee representing its creditors.

Dubai’s credit risk dropped three times more than Middle East peers in the past year as companies restructure debt and amid a recovery from one of the world’s worst property crashes. Last week, Dubai Group LLC said it had agreed with creditor committees regarding the terms on $6 billion of debt, while in 2012, Drydocks World LLC revamped $2.2 billion.

“We are reaching the end of the restructuring cycle,” Yaser Abushaban, executive director of asset management at Emirates Investment Bank, said by phone yesterday. “This type of restructuring manifests that Dubai has the ability to come to a resolution with counter parties, allowing the market to move forward.”

Lower Risk

Five-year credit default swaps for Dubai, home to the world’s tallest skyscraper, fell 165 basis points, or 1.65 percentage points, in the past year to 195 on May 10, according to data provider CMA. That compares with an average 54 basis-point decline to 258 for Middle East contracts, data of CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market, show. Dubai swaps soared to more than 900 in 2009 during the height of the debt crisis.

Amlak, part-owned by Emaar Properties PJSC, will make earlier payments if cash flow allows, the people said. The current business plan of Amlak, which is estimated to owe about 10 billion dirhams ($2.7 billion), is to focus on mortgage lending rather than developing properties, they said.

The creditor committee, which is being advised by PricewaterhouseCoopers LLP, should respond to the company this month. Emirates NBD PJSC is chairing the committee, which also includes Standard Chartered Plc, Dubai Islamic Bank PJSC, Abu Dhabi Islamic Bank PJSC, Dubai’s Department of Finance and the National Bonds Corp. KPMG LLP is advising Amlak.

Moving On

The proposed Amlak restructuring “isn’t the outcome the creditors were hoping for, but it’s a resolution that avoids a worse outcome and enables the creditors and companies to move on,” Abushaban said.

Spokesmen for Amlak, ADIB, DIB, National Bonds, PricewaterhouseCoopers, KPMG and the Dubai Media Office didn’t immediately respond to requests for comment, while those for Standard Chartered and Emirates NBD declined to comment.

Mortgage lending is picking up as average price of a mid-range villa in Dubai increased 44 percent in the year to April to the highest since November 2008, according to Cluttons LLC data on Bloomberg.

Shares of Amlak and Tamweel PJSC, another Dubai-based Islamic mortgage company, were suspended in November 2008 after the global credit crisis blocked their access to borrowing. Amlak reported a third-quarter loss of 40 million dirhams in 2011, the last time the lender disclosed financial results, according to bourse filings.

Tamweel Takeover

Tamweel is being taken over by Dubai Islamic Bank PJSC, which completed a share swap last week to acquire the 42 percent stake it doesn’t already own. The yield on Tamweel’s $300 million of 5.154 percent Islamic bonds maturing in January 2017 has fallen 19 basis points this quarter to 3.34 percent at 6:25 p.m. in Dubai, according to prices compiled by Bloomberg.

That’s more than the eight basis-point decline in the period to 3.92 percent in the yield on Dubai’s $750 million of 3.875 percent sukuk due January 2023. Malaysia’s $800 million of notes due in July 2021 yielded 2.83 percent, down 10 basis points.

Amlak’s liabilities were reduced by 4 billion dirhams in March 2012 after it sold land and reached agreements with some creditors. A government committee overseeing the restructuring decided not to liquidate the company to protect the rights of shareholders, United Arab Emirates Economy Minister Sultan Bin Saeed al-Mansouri said at the time.

In January, al-Mansouri said the restructuring may be resolved in the second quarter.

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