Kuwaiti developer holds back sukuk issue

DUBAI // Kuwait's Abyaar Real Estate Development has postponed the sale of Islamic bonds worth up to $1 billion (Dh3.67bn) initially planned for this year due to a global credit crunch, a company official said on Monday. "We have postponed the bonds until a better time. No way any company can issue sukuk now. There is no cash," Marzouk al Rashdan, the vice president said, adding that Abyaar would also postpone a listing in Dubai until market conditions improve.

Islamic bonds are the preferred method of raising capital among many Middle Eastern companies, a market that is worth an estimated US$250 billion (Dh918bn). However the issuing of 'sukuk' bonds has also begun to feel the impact of the global credit squeeze. A report issued last month by the Islamic Finance Information Service said that the issuance of Islamic bonds had fallen 54 per cent in the first half of this year compared with the same period last year.

Abyaar said in March it was in talks with Merill Lynch to issue sukuk worth $500 million and was also negotiating with NBD Investment Bank, a unit of Emirates NBD, to issue sukuk worth between $300 to $500 million, to finance expansion into Asia and the Gulf. Merill Lynch was taken over last month by Bank of America, a deal that was intended to save the investment institution from collapse. Abyaar is also planning to develop a $1 billion resort in Egypt's Red Sea in 2010 and plans to invest up to 9 billion riyals (Dh8.8bn) in the Saudi Arabian property market until 2010, Mr Rashdan said.

"We have already acquired a land in Jeddah and will start a real estate project there worth an initial investment of 1 billion riyal," he said. "Saudi has a huge potential because of the big population and high demand on property." With Reuters