Emirates Reit’s sukuk exchange move fizzles out due to lack of investor support

The move by Emirates REIT, the UAE’s oldest Shariah-complaint real estate investment trust, to win investor support for its Sukuk exchange offer fizzled out as it could not muster the required vote.

In a statement issued on Monday, Equitativa, manager of Emirates REIT, said as of Sunday, June 6, 2021, “a clear majority of voting Sukuk holders (57 per cent) had voted in favour of its Consent Solicitation Memorandum (CSM), but support remained short of the special majority threshold of 75 per cent needed for the exchange offer to proceed.”

The company pledged that it will pay the upcoming Sukuk profit distribution in June as it has begun to see steady improvement in the Dubai market.

The Ad-Hoc Group, comprising 11 institutional investors who rallied against the move, welcomed the “pragmatic decision to rescind the consent solicitation” and said it is committed to commencing constructive discussions with the company in earnest.

The REIT manager confirmed that overall, 79 per cent of all Sukuk holders voted in the CSM process. “Emirates REIT has 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.”

The CSM was a voluntary transaction proposed by Emirates REIT designed to enhance the tradability of the Sukuk by providing Sukuk holders with the 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 per cent profit rate for the new secured Sukuk and consenting Sukuk holders were offered up to a 1.0 per cent consent fee,” Equitativa said.

Emirates REIT also 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 will pay its upcoming Sukuk profit distribution in June.

Refuting the claim made by Equitativa, the Ad-Hoc Group said the voting data demonstrated the overwhelming opposition to the consent solicitation and extent of concerns from the certificate-holders. "The voting data also confirms the blocking position of the Ad-Hoc Group, which along with other institutions, represents circa. 40 per cent of the Certificates outstanding.”

Emirates REIT said the value of its Sukuk due in December 2022 rallied 8.0 basis points, or 12 per cent (as at 6 June 2021), since the revised Sukuk terms were initially proposed, “reflecting the overall positive market sentiment towards the voluntary offer.” — issacjohn@khaleejtimes.com