Sorouh to sell $1b in asset backed bonds

The United Arab Emirates' Sorouh Real Estate is going to sell $1 billion of asset backed securities that comply with Islamic law during the second quarter to help fund expansion, a company executive said.

The bonds, like traditional Islamic bonds known as sukuk, are asset backed. But unlike sukuk, they allow buyers direct access to the underlying asset.

"It is going to be a unique sukuk, it will be an asset-backed securities (ABS) sukuk which will be launched in the second quarter," the executive, who declined to be named, said yesterday. He said the worth of the issue would be $1 billion.

Sorouh Chief Executive Mounir Haidar said in February Dhabi's largest property developer by market value was close to finalizing a $1 billion borrowing program to finance expansion in Dubai property.

Haidar has said Sorouh's projects could triplicate to Dh120 billion ($32.68 billion) in coming five years.

Asset-supported bonds can receive a higher credit rating than the issuer of Dubai Property, especially when the bonds are based on strong underlying revenue-generating assets.

The agreement also sequester the issuer from creditors should instability hit the assets, and the bond holders are not known to the issuer's future actions. Citigroup and three Abu Dhabi-based banks are arranging the sale in Dubai property, the executive said.

The securitization market had the potential to be worth $250 billion by 2010, said Nasser Al Saidi, chief economist of the Dubai International Financial Centre.