A gaggle of worldwide lenders is battling for higher transparency and governance adjustments at a serious Dubai actual property funding belief forward of a crunch vote on its restructuring plans on Monday, marking a uncommon case of investor activism within the Gulf.
Emirates REIT, the biggest sharia-compliant Reit within the United Arab Emirates, faces resistance from a bunch of debtholders because it seeks to restructure a $400m Islamic bond, or sukuk, maturing in December 2022. A $10.2m fee is due later this month.
The dispute poses one other problem for the Gulf’s business hub because the UAE seeks to clear its popularity within the wake of a number of monetary scandals, together with the collapse of UK-listed, Abu Dhabi-based hospital operator NMC and the Dubai-based rising markets non-public fairness agency Abraaj.
Emirates REIT has described the restructuring as “a simple and voluntary amend and prolong transaction . . . designed with the pursuits of sukuk holders in thoughts”. The car, which is listed on Nasdaq Dubai, has stated it’s assured of securing the consent of the 75 per cent of bondholders required by June 7.
However a bunch of buyers, referring to themselves because the “Advert Hoc Group”, is asking for higher governance on the Reit’s supervisor, Equitativa, as one situation for agreeing to the restructuring. Equitativa is owned by Sylvain Vieujot and his spouse, Magali Mouquet, who’re chief govt and govt director of Emirates REIT, respectively.
Members of Advert Hoc embody worldwide asset managers similar to Scotland’s Aberdeen Commonplace Investments and Vontobel of Switzerland, folks aware of the group stated. Each of these asset managers declined to remark.
The group, which says its members maintain 40 per cent of the debt, is asking for the supervisor to scale back what they argue are “extreme” administration charges and to supply buyers a greater monetary bundle for the restructuring.
“The Advert Hoc group is upset with the character and enterprise ethics of an organization that refuses to interact with significant debt stakeholders who’re expressing reputable considerations, demanding transparency and enchancment of governance,” stated a consultant. “The group reserves its choices within the occasion its grievances are usually not addressed.”
In response, a spokesperson for Equitativa stated the Reit has a “strong company governance framework,” with 5 separate boards and quite a few impartial administrators, and that its charges had been “in step with business friends”.
The corporate, suggested by Houlihan Lokey, added its restructuring proposal is honest. It could change the present unsecured sukuk with a brand new instrument maturing in 2024, backed by property valued at $280m.
Final yr a bunch of shareholders, separate to the bondholders, wrote to the Reit’s regulator to lift considerations whether or not it was overvaluing its portfolio to spice up charges.
The Dubai Monetary Providers Authority informed the Monetary Occasions it might take acceptable motion if it discovered any proof of wrongdoing, however declined to touch upon any energetic investigations.
Emirates REIT, which denied the shareholders’ claims that it was overvaluing, final month stated it might scale back its administration charges by 20 per cent this yr after a brand new valuation crew marked down the worth of its portfolio by 19 per cent to $690m on the finish of 2020, from $855m within the third quarter of final yr. The corporate attributed the decline to coronavirus’ influence on Dubai’s property sector.
The opposing bondholders, suggested by Rothschild, have referred to as for Emirates Reit to reveal these exterior valuation reviews as they argue that the discount is unlikely to be solely pushed by Covid-19.
Within the wake of the restructuring proposal, Fitch downgraded Emirates Reit to its lowest ranking earlier than a default, however the ranking company stated it had sufficient liquidity to satisfy the June coupon fee.
Nonetheless a consultant of the bondholder group stated it believes, based mostly on money move forecasts, that the corporate could also be unable to satisfy a December fee. Equitativa stated it’s comfy with its liquidity place.