Corporate Sukuk – Dar Al Arkan Benchmark US$600m Sukuk

Saudi Residential Property Developer Dar Al Arkan (DAAR) Taps International Sukuk Market with Benchmark US$600m Sukuk Offering in July 2023

The Dar Al Arkan Real Estate Development Company (DAAR), the leading and largest publicly listed Saudi Arabian residential property developer and mortgage financier, successfully closed its latest Sukuk offering – a US$600 million fixed rate RegS Senior Unsecured hybrid Tawarruq/Ijara Sukuk on 19 July 2023.

DAAR is a regular issuer of Sukuk both in the Saudi domestic and international markets. This latest issuance is DAAR’s 13th Sukuk overall and the ninth tranche issued under its US$2.5 billion Trust Certificate Issuance Programme established on 7 June 2022 and arranged by Alkhair Capital (Dubai) Limited, Standard Chartered Bank, Deutsche Bank and Emirates NBD Capital. This latest US$600 million Sukuk was issued through Cayman Island-incorporated Trustee, Dar Al-Arkan Sukuk Company Limited, on behalf of its obligor, Dar Al-Arkan Real Estate Development Company.

Prior to this issuance, DAAR raised US$400 million in July 2022 through a similar transaction – a 3-Year US$400 million Regulation S senior unsecured hybrid Tawarruq/Ijara Sukuk which was priced at a profit rate of 7.75% maturing in February 2026, offering a yield of 8%.

For this latest transaction, Dar Al Arkan had mandated Abu Dhabi Commercial Bank, Alkhair Capital (Dubai), Al Rayan Investment, Commercial Bank of Dubai, Emirates NBD Capital, First Abu Dhabi Bank, J.P. Morgan, Mashreq, Sharjah Islamic Bank, Standard Chartered Bank and Warba Bank to act as joint lead managers and bookrunner to the transaction and to arrange a series of investor meetings and calls and to advise on the pricing of the transaction.

In a disclosure to Tadawul (the Saudi Stock Exchange), DAAR stressed that the order book for the Sukuk transaction was opened on18th of July 2023 and closed on the same day. Dar Al Arkan had set the initial price guidance of around 8.5% for the US dollar-denominated Islamic trust certificates, which has a tenor of 5.5 years, maturing on 25 February 2029.

Demand for the issuance, according to DAAR, was robust, receiving significant interest from regional and international market participants with the order book reaching SAR6.15 billion (US$1.64 billion). This allowed a tightening of the pricing compared with the initial price guidance, settling at a profit rate of 8% per annum on the day of opening. Proceeds from the issuance will be used to further support Dar Al Arkan’s development goals and pipeline of projects.

The trust certificates were admitted for listing and trading on the main board of the London Stock Exchange and Nasdaq Dubai at end July 2023. With this latest listing, Dar Al-Arkan’s listed securities on Nasdaq Dubai comprise four Sukuk issuances with a total value of US$2 billion. “We are elated to celebrate our US$600 million Sukuk listing on Nasdaq Dubai. This marks our 13th issuance and 9th under the US$2.5 billion Trust Certificate Issuance Programme, a testament to our investors’ unwavering support,” said Andy Raheja, CEO of Dar Al-Arkan.

With this latest listing, the total value of Sukuk listed in Dubai reached US$79 billion, with US$76 billion listed on Nasdaq Dubai alone. According to Hamed Ali, CEO of DFM and Nasdaq Dubai, “as the international financial exchange in the Middle East, Nasdaq Dubai is unwavering in its dedication to fostering growth of the UAE capital and Sukuk market. Nasdaq Dubai’s continued growth as a leading platform for Sukuk listings underscores its paramount significance in the global financial marketplace.”

Dar Al Arkan, which is listed on Tadawul, is the largest Saudi developer by market value and has a portfolio of assets valued at more than SAR31 billion (US$8.26 billion). Dar Al-Arkan’s activities include residential, mixed use and commercial developments in Riyadh, Jeddah, Mecca and Medina and other cities across in Saudi Arabia, as well as Dubai. The company has expanded to new markets, such as Egypt and Bosnia and Herzegovina, and today has operations in eight countries and has delivered 15,000 residential units.

DAAR earlier this year reported increased revenues for FY2022 of SAR3.93 billion – up from SAR2.49 billion in 2021. Similarly, total assets increased to SAR33.51 billion from SAR31.96 billion for the same period. Profits attributable to equity shareholders increased from SAR130 million to SAR440 million in the same period.

Earlier this year, Dar al Arkan’s independent international development subsidiary, Dar Global PLC, was admitted to the Standard Segment of the Official List of the FCA (UK’s Financial Conduct Authority) and to the Main Market of the London Stock Exchange with a valuation of SAR2.25 billion. The official direct listing on the London Stock Exchange makes Dar Al Arkan one of the first Saudi homegrown brands to list on the London Stock Exchange.

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