Dubai’s Tamweel to tap debt market as costs drop

Tamweel, the mortgage company majority-owned by Dubai Islamic Bank, plans to tap the debt market this year for the first time since 2008 as demand for Islamic bonds keeps borrowing costs near six-year lows.Tamweel will issue either a benchmark-sized sukuk or a mortgage-backed security in the fourth quarter to create a “long-term financing pipeline to repay liabilities and grow the business,” acting chief executive officer Varun Sood said. Tamweel has appointed banks for the transaction, he said, declining to identify them. “We’re being advised that it’s a good time to go to the market in spite of the financial turmoil,” he said in an interview at Tamweel’s headquarters in Dubai Tuesday. “Maybe there would be some impact on pricing, but there’s still demand for Islamic financing instruments.” Islamic debt sales in the GCC, which includes Saudi Arabia and Bahrain, jumped 51 percent to $3.73bn so far this year compared with the year-earlier period.Tamweel, which along with fellow Islamic lender Amlak provided almost 90 percent of all mortgages in the UAE, halted lending in October 2008 after the global credit crisis blocked their access to funds. The company resumed lending last November after Dubai Islamic Bank, the UAE’s biggest bank that complies with Muslim banking rules, raised its stake in Tamweel to 58 percent to help boost the mortgage market.“The focus for us now is to get back into the funding market,” said Sood, 47, who took over as interim CEO in November after Wasim Saifi quit. “Undoubtedly, we’re looking at the bond market for the sustainability of the business.” Tamweel last issued bonds in July 2008 when it sold AED1.1bn ($299m) of Islamic bonds, paying a profit rate of 2.25 percentage points more than the quarterly Emirates interbank offered rate. It also raised $300m from a sukuk sale in December 2007. “Funding will be available, the question will be the cost,” Sood said. “We’re not too concerned though. We want to do the transaction to get ourselves back into the market and then you can be a little choosy on dictating the terms on the pricing.”Tamweel may set up an Islamic bond program “depending on where investors are available,” Sood said. “We’re hearing that there is some interest in the Malaysian markets for instruments issued over here so we’ll be exploring that.”The company posted a fivefold rise in second-quarter profit to AED27.7m as bad-loan provisions dropped, Tamweel said last month. Impairment provisions fell 66 percent to AED13.5m, while operating income dropped 9.4 percent to AED148.8m. Tamweel may use some of the money it raises this year to repay or refinance the sukuk that mature in 2013, Sood said.“The plan is that by then we would have created enough of a funding pipeline, which would enable both options,” he said. “If investors were interested we could rollover, or we could pay off and replace it with something new.” Dubai Islamic Bank paid AED374.7m to increase its stake in Tamweel in the government-led rescue. Tamweel shares resumed trading on May 10 after being halted for almost two years pending its reorganization.“Until we do our first transaction whatever funding support is necessary in the short-term is being met by Dubai Islamic Bank,” Sood said. “It’s enough for us to meet the growth of the business and to ensure that we have enough funds for repayments.” From / Arabian Business News