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Dar al-Arkan 'can repay $587m sukuk'

Riyadh, February 13, 2010

Saudi home builder Dar al-Arkan has enough cash to repay 2.2 billion riyals ($586.7 million) worth of an Islamic bond that matures next month, its chief financial officer said on Saturday.

Benoit Bellerose was speaking after Saudi Arabia's biggest property developer by market value raised a lower-than-expected $450 million from a new five-year sukuk, or Islamic bond, priced at 10.75 per cent.

"This is a very good price given the market conditions. We believe that this was the only debt transaction done last week for emerging markets which demonstrates the interest of investors around the world in Dar al-Arkan and in the region," Bellerose told Reuters in a telephone interview.

Bankers said Dar wanted to raise at least $500 million and up to $700 million. Dar wants to use proceeds from the latest sukuk, the company's fourth, to finance capital expenditure during 2010, a prospectus for investors showed.

Before this issue, Dar's total borrowings rose to 8.35 billion riyals in 2009, up from 7.64 billion riyals in 2008. Of these debts, Dar will have to repay 2.7 billion riyals before the end of 2010, its financial statements showed.

"There is 2.2 billion riyals which is a sukuk that matures in March and the rest (500 million riyals) are short-term revolving facilities," Bellerose said. "We have enough cash in our bank to repay 2.2 billion riyals in sukuk that matures in March, 2010," he added.

Dar will also need to repay debts worth 600 million in 2011 and another 5.05 billion riyals between 2012 and 2014. Bellerose declined to say if the company sees a need to tap the debt market again in 2011.

The new $450-million sukuk issue was the first from the region this year since Dubai World jolted global markets in November with plans for a $26 billion debt standstill request. It also was the first 144a bond issued by a Saudi firm.

There has been an increase in Gulf Arab corporate and quasi-sovereign issuers opting for 144a types of issues, which are regulated under the U.S. securities commission allowing US investors to buy into the issue.

Standard and Poor's assigned in January a BB- to Dar's long-term rating and to its sukuk issue which it said will be for an amount in line with previous issuance.

Asked why Dar took less cash from the issue than anticipated, Bellerose said: "We never said anything about the minimum to be raised. It was a benchmark transaction which usually goes for about $500 million.

"We are very happy with the results of this transaction. Although the deal was significantly oversubscribed, the company has decided to close with $450 million as it will allow us to continue our investment program.

"We managed to close this transaction within the guidance provided to investors privy to the deal. The ability to close such a deal without having to increase the yield was a testimony of Dar's strength and good story," Bellerose said.

Deutsche Bank, Goldman Sachs and Bahrain-based Unicorn Investment Bank arranged the sale.-Reuters




Tags: sukuk | Islamic bond | Dar Al Arkan | repay |

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