Dubai-based Emirates REIT on Monday withdrew the restructuring proposal for its $400 million Islamic bond after a group of investors successfully opposed the deal.
Emirates REIT said 57 percent of voting sukuk-holders were in favour of its exchange offer, falling short of the 75 percent it required to push through the proposal. As a result, it rescinded the plan but vowed to continue exploring options to improve the REIT’S sukuk and equity trading.
The company also said that “there has been no event of default or any dissolution event” with its debt and that it will pay its upcoming sukuk profit distribution in June as scheduled.
Citing a property slump compounded by the global pandemic, the Shariah-compliant fund had said it needed to improve its balance sheet, offering to exchange unsecured sukuk securities for new notes and asking to defer coupon payments for a year. Fitch Ratings has said the transaction would have been viewed as a “distressed debt exchange”.
The creditors opposing the deal formed a so-called “ad-hoc group” that included local and international investors and asked Emirates REIT to amend its proposal and discuss its concerns. The dissenting shareholders, who said they represented around 40 percent of the sukuk holders, welcomed the latest move.
In rejecting the deal, the group of creditors said the company first had to address its “weak governance, cash leakage and continued lack of transparency”.
A statement from the group on Monday said: “In light of the company’s weak liquidity, the ad-hoc group would encourage Equitativa to respond to its request for a meeting to commence discussions towards achieving a consensual deal, which would be in the best interest of Emirates REIT, certificate holders and shareholders.”
The group added that a “consensual restructuring agreement” could provide the company with adequate flexibility to improve governance and undertake a turnaround, whilst providing certificate holders with adequate downside protection for the incremental risk that certificate holders bear.
“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,” said Arun Reddy, managing director at investment bank Houlihan Lokey Inc.
The REIT last year hired Houlihan as an adviser as it mulled ways to improve its balance sheet and considered a potential delisting from the Dubai stock market.
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