Corporate Sukuk – SOBHA Realty USD230mn Tap Sukuk

UAE Luxury Apartment Developer SOBHA Realty Successfully Closes USD230mn Tap Sukuk in September 2024 which will be Consolidated with its July 2023 Maiden 5-year US$300m Hybrid Wakala/Murabaha Sukuk to a Single Series in October 2024

UAE-based international luxury apartment developer, SOBHA Realty, successfully issued a Tap USD230mn Hybrid Murabaha/Wakala Sukuk on 17 September 2024, which according to the final terms of the issuance will be “consolidated and form a single series with the USD300mn trust certificates due 2028 issued on 17 July 2023.” The inaugural USD300mn Sukuk has a current outstanding balance of US$270mn.

The 2023 offering was SOBHA Realty’s maiden Sukuk issuance in the international market – a US$300 million 5NC3 Sukuk with a 5-year tenor maturing in 2028. The consolidation will bring the aggregate issuance size of the Sukuk to a benchmark USD530mn transaction.

According to the final terms, “the Trust Certificates shall be consolidated on 27 October 2024 and form a single series with the USD300mn trust certificates due 2028 of the Trustee, SOBHA Sukuk 1 Limited, issued on 17 July 2023. The Trust Certificates will have the same terms (other than the issue date and the issue price) as those of the Original Trust Certificates and will be treated as a single class together with the Original Trust Certificates, including with respect to waivers, amendments, redemptions and offer to purchase, and will be fully fungible with the Original Trust Certificates.”

The hybrid Tap USD230mn Murabaha/Wakala Sukuk was issued like the maiden offering by SOBHA Sukuk Limited, an exempted company with limited liability incorporated in the Cayman Islands, on behalf of the obligor, PNC Investments LLC.

The original Sukuk transaction was priced at a profit rate of 8.75% per annum payable semi-annually in arrears. But according to the developer, because of the robust interest in SOBHA Realty’s TAP Sukuk this led to a notable price tightening of 95 basis points, highlighting strong demand from both regional and international investors.

In fact, a quarter of the demand came from international investors in Europe and Asia, which says SOBHA Realty reflects strong confidence in the company’s fixed income offerings.

SOBHA Realty mandated Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, Sharjah Islamic Bank, and Standard Chartered Bank as Joint Global Coordinators, Joint Lead Managers, and Bookrunners for this transaction, and to arrange a series of investor calls with local and international accounts. 

According to the final terms document, the Issue Proceeds and the Additional Amounts will be applied by the Trustee pursuant to the terms of the relevant Transaction Documents on the Issue Date in the following proportion: (a) not less than 55 per cent. of the aggregate face amount of the Trust Certificates towards the purchase from PNCI of all its rights, title, interests, benefits and entitlements in, to and under the Assets pursuant to the Supplemental Purchase Agreement; and (b) the remaining portion of the Issue Proceeds (being not more than 45 per cent. of the aggregate face amount of the Trust Certificates) towards the purchase of commodities to be subsequently sold to PNCI pursuant to the Murabaha Agreement.

According to SOBHA Realty, “this overall landmark achievement includes a call feature, making it the first of its kind for a GCC sub-investment grade benchmark-sized Sukuk. The issuance not only signifies a significant milestone for SOBHA Realty but also for the entire industry.”

The Sukuk issuance garnered “exceptional investor diversification, with a notable participation from international investors. This achievement highlights Sobha Realty’s commitment to innovation and its ability to attract a diverse range of investors from around the globe.”

According to Ravi Menon, Co-Chairman of Sobha Realty, the successful issuance of the inaugural US$300 million Sukuk is a milestone accomplishment for the company and a testament “to our dedication to innovation and our capacity to entice investors from various parts of the world. We take immense pride in the confidence shown in us by the global investment community.”

This latest Tap USD230mn Sukuk issuance follows recent upgrades of SOBHA Realty’s institutional and long-term credit rating from S&P Global Ratings from BB-/Positive to BB/Stable, and from Moody’s Investors Service from Ba3/stable to Ba2/stable. These upgrades, stressed SOBHA Realty, “reflect our strong financial results, including substantial EBITDA growth, a larger revenue backlog, and improved EBITDA margins.”

The Sukuk certificates, rated Ba3 by Moody’s Investors Service and BB by S&P Global Ratings, are listed on the International Securities Market of the London Stock Exchange, Nasdaq Dubai and the Official List of Securities of the DFSA.

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