Emirates REIT rescinds voluntary consent solicitation

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  • A majority of Sukuk holders voted in favor of solicitation but support fell short of the required 75 percent mark

  • Trust confirms it will pay upcoming Sukuk profit distribution in June

Dubai : As of Sunday, a majority (57 percent) of voting Sukuk holders have voted in favor of Emirate REIT’s Consent Solicitation Memorandum (CSM), but the support fell short of the special majority threshold of 75 percent needed for the exchange offer to proceed.

The Emirates REIT has, according to its manager Equitativa (Dubai) Limited, therefore decided to rescind the voluntary offer and will continue to work on enhancing the capital structure for the benefit of all equity and debt holders within the REIT, as well as looking to achieve greater alignment of intrinsic and market value of the Company’s traded securities.

Overall, 79 percent of all Sukuk holders voted in the CSM process. A Sukuk is a sharia-compliant bond-like instrument used in Islamic finance.

Emirates REIT is a Dubai-based real estate investment trust investing principally in income-producing real estate in line with Shari’a principles. It currently owns a well-balanced portfolio of 11 assets in the commercial, education and retail sector. Emirates REIT benefits from exclusive Ruler’s Decrees permitting it to purchase properties in onshore Dubai and Ras Al Khaimah.

The CSM was a voluntary transaction proposed by the Emirates REIT. It was designed to enhance the tradability of the Sukuk by providing Sukuk holders an opportunity to exchange an unsecured Sukuk for a new secured Sukuk on a dollar-for-dollar basis.

The Company provided all available security to Sukuk holders as part of the proposed exchange but the Sukuk will now remain unsecured. The Company had also proposed to maintain the existing 5.125% profit rate for the new secured Sukuk and consenting Sukuk holders were offered up to a 1.0% consent fee.

Reflecting the overall positive market sentiment towards the voluntary offer, the value of Emirates REIT’s Sukuk due in December 2022 rallied 8 basis points, or 12% (as of 6 June 2021), since the revised Sukuk terms were initially proposed.

Arun Reddy, managing director at investment bank Houlihfavorey, an advisor to Emirates REIT, said the fact that the Sukuk rallied 12% over the offer period and that a clear majority of Sukuk holders voted in favor, is a sign of the appealing nature of the transaction.

“We will continue to reflect on feedback from the market and work with the Company with the aim of addressing the structural issues we observe in the Sukuk and equity instruments within the capital structure,” he said.

Emirates REIT reiterated that contrary to recent market speculation, there has been no event of default or any dissolution event with its debt. The Company also confirmed that it would pay its upcoming Sukuk profit distribution in June.

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