Dubai Property Fund Unswayed by Creditor Dissent in Debt Dispute

Dubai-listed Emirates REIT made no indication it’s willing to compromise with a group of creditors that rejected its proposal to exchange $400 million of sukuk securities for new notes.

A dispute with investors escalated on Wednesday after the dissenting certificate-holders said they have the numbers to block the offer and asked for a meeting with the company the following day “to discuss the concerns of the Ad-Hoc Group and its requirements for the restructuring process.” Rothschild & Co. and Clifford Chance are advising the group.

In response, Emirates REIT said voting to accept its restructuring proposal remains open and reiterated that it has sufficient cash on hand to pay “the profit payment” due next month, if necessary. It didn’t say whether it would accept the invitation to meet on Thursday.

Read more: Emirates REIT Cut to Near Default by Fitch on Debt Exchange Plan

The creditors formed a so-called steering committee that includes several certificate-holders with large exposure to lead the talks with Emirates REIT, according to a separate document seen by Bloomberg. The steering committee consists of Aberdeen Standard Investments Ltd, GFH Financial Group, Sancta Capital, Shuaa Capital PSC and Oasis Management Co Ltd, the document showed.

Emirates REIT, whose portfolio ranges from schools to office space, has said it needs to improve its balance sheet after the global pandemic compounded a property slump in Dubai.

The Shariah-compliant real estate investment trust last week offered to exchange the unsecured sukuk securities due in 2022 for new secured notes maturing in 2024. Under the plan, the REIT’s coupon payments would be deferred for a year and be paid at maturity. The existing sukuk’s 5.125% rate is to be maintained.

The proposed transaction would represent “a material reduction in terms for lenders and is therefore viewed” as a distressed debt exchange, according to Fitch Ratings, which downgraded the Dubai-listed REIT to near-default status on Monday.

The REIT last year hired Houlihan Lokey Inc. as an adviser to help it review its options and has been considering a potential delisting from Nasdaq Dubai. It’s also said that the Dubai Financial Services Authority is investigating matters connected to its management.

The group of dissenting creditors said it represents a blocking majority to the offer and includes 13 institutions, with investors from the Gulf region, Europe, North America and Asia, alongside banks from the United Arab Emirates. It set out a list of conditions to develop a revised proposal, saying it would have to address issues ranging from governance to management fees and operating costs.

“The Ad-Hoc Group is prepared to work to reach a quick and efficient resolution,” it said in the statement.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.