Dar Al-Arkan successfully redeems first sukuk issue

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Dar Al-Arkan successfully redeems first sukuk issue


Yousef Abdullah Al-Shelash, chairman of Dar Al-Arkan, third left, is addressing the press conference at the Marriott Hotel in Riyadh on Tuesday. (AN photo by Khalid Al-Khameez)

By MD RASOOLDEEN | ARAB NEWS
Published: Mar 9, 2010 23:24 Updated: Mar 9, 2010 23:48

RIYADH: Dar Al-Arkan Real Estate Development Company, a residential real estate developer in the Kingdom, announced on Tuesday that it has successfully redeemed its inaugural sukuk issue of March 2007.

Issued by DAAR International Sukuk Company, the landmark three-year $600 million issue marked the first sukuk by a Saudi company in the international capital markets. Launched as a $425 issue, it received an overwhelming response from financial institutions across Europe, South East Asia and the GCC region.

Speaking at a news briefing in Riyadh on Tuesday, Yousef Abdullah Al-Shelash, chairman of Dar Al-Arkan, said, "We are pleased to report the successful repayment of our debut sukuk and would like to thank our sukuk holders for their confidence in Dar Al-Arkan."

He pointed out that the overwhelming response received from the international financial community for the launch of this sukuk represents a vote of confidence not only in Dar Al-Arkan but also in the Saudi economy.

"We are committed to maintaining our lead role in providing affordable housing solutions that meet international standards to middle income families across the Kingdom," he said.

Al-Shelash said the Kingdom has a huge real estate market, which has a lot of potential when compared to other countries in the region. "The reason for its vibrancy is mainly due to governmental assistance and incentives given to the sector," he said, adding that half of the native population is young which would contribute a great deal to its development.

In February, Dar Al-Arkan concluded deals valued at SR1 billion with local companies to set up the Riyadh Arooz project in the capital. The company has some 25 projects throughout the Kingdom, including Al-Tilal compound in Madinah, Al-Qasr in Riyadh and Al-Khozama and Arooz palace in Jeddah.

Majid Al-Sayed Bader Al-Refai, managing director and chief executive officer of Unicorn Investment Bank, the joint lead manager, joint book runner and shariah adviser to the sukuk issue, said the ability of Dar Al-Arkan to successfully meet its obligations at a time when a number of sukuk issuers have either defaulted or are seeking restructuring bears testimony to the strength of Dar Al-Arkan's business model and the strength of the Saudi economy in general. "We are proud to have been associated with this transaction and would like to congratulate Dar Al-Arkan on the successful redemption of this groundbreaking issue," Al-Refai said.

Al-Refai said the sukuk market in the Kingdom has huge potentials. "People are attracted to it because of its halal nature despite its description as a bond," he said. Islamic sukuk is a good option in preference to conventional bonds.

Ikbal Daredia, head of Capital Markets, Institutional Banking and Treasury at Unicorn and chief executive officer of Unicorn International Islamic Bank Malaysia Berhad, said the success of Dar Al-Arkan in this effort shows positive signals of the company's strength.

In January 2010, Moody's Investor Service assigned a Ba2 rating to Dar Al-Arkan, the largest developer in Saudi Arabia by market value. Moody's noted that the Ba2 rating is one of the highest industry ratings; the mean rating of global homebuilding companies is Ba3. The Ba2 rating also positions Dar Al-Arkan well above regional peers in the GCC countries.

Standard & Poor's Ratings Service has assigned a BB- rating to the company.