DIFC Investments LLC, which owns properties in the Dubai International Financial Center business park, said it plans to raise about $700 million from an Islamic bond sale to repay debt and fund development as borrowing costs decline.
The state-controlled company, which is planning to issue the sukuk before the end of October, will use the proceeds to repay the $650 million outstanding on a syndicated loan, DIFC Governor Essa Kazim said at a news conference in Dubai today. The remainder will be used to develop a 10th building in DIFC’s Gate Village and fund the completion of a connecting corridor across the business park, he said.
DIFC Investments joins companies in the region including Emaar Properties PJSC in selling bonds to take advantage of cheap borrowing costs. The average yield on Middle East bonds fell 20 basis points this year to 4.6 percent on Sept. 19, three basis points from a record low, according to data from JPMorgan’s Middle East Composite Index.
Replacing the loan with an unsecured bond will help release assets pledged to banks, Rajesh Pareek, chief financial officer of the DIFC Authority, said at the news conference.
DIFC Investments had lowered the margin on the loan nine months ago by 100 basis points, or 1 percentage point to 2.8 percentage points more than the Emirates/London interbank offered rate, Kazim said. The loan matures June 2017, according to data compiled by Bloomberg.
The number of registered companies operating in the tax-free DIFC rose 7 percent in the six months through June to 1,113, while the number of financial services companies climbed to 350 from 327 in the same period, according to Kazim. He said DIFC is planning to double the number of companies working in the center by 2018.-Bloomberg
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