Amlak renegotiates part of debt deal with creditors

04 January 2017

The Islamic mortgage provider says majority of creditors have approved the new business plan

Dubai’s shariah-compliant home financier Amlak has renegotiated parts of the debt restructuring deal it had had reached with the creditors following a collapse of the UAE’s real estate market which saw prices of properties slumping more than half in 2008.

Amlak, which is 45 per cent owned by UAE’s biggest property developer Emaar Properties, said a “super majority” of creditors have formally approved Amlak’s new business plan, according to a statement by the company.

Amlak had reached a debt restructuring deal in 2014 following a government cash injection and six years of negotiations with creditors.

The company is the latest among the UAE business entities revisiting their debt restructuring deals with the banks to seek more favourable deals as the performance of the businesses improve. Dubai World is one example, which reached a new agreement with creditors in 2015 for a $14.6bn debt deal it had signed in 2011.

Amlak had approached the creditors in September 2016 to waive a number of “restrictive covenants, which included adjustments to certain restrictions to allow for the company’s mortgage book to be maintained at higher anticipated levels, funds to be raised under certain pre-agreed parameters, and restrictions on business origination to be removed,” it said in a statement to Dubai Financial Market (DFM), where its shares were readmitted for trading in 2014.

“These adjustments are essentially aimed to raise new business origination limits and the way Amlak can raise new funding to grow its balance sheet,” it said in the statement.

The changes will be in full compliance with central bank rules for Islamic finance companies.

At the time of original deal, Amlak did not give the size of the debt being restructured, but bankers estimated it at about $2.7bn. The deal allowed creditors to swap AED1.3bn ($354m) of their debt into a “convertible instrument” to be redeemed over a 12-year period as Amlak sells some real estate assets.

Since the original restructuring Amlak has, successfully serviced its debt and the new terms do not affect the repayment period or amounts, or profit payments to financiers. The Company has also paid AED3.5bn, which represents 42 per cent of total debts outstanding of cash back to its financiers, and redeemed AED200m, which represents 15 per cent of the Contingent Convertible Instrument within the first year of restructuring.

The company has generated net profits of AED136m for the full year 2015 and AED94m for the first nine months of 2016.

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