Proceeds from the issue will be partly used to refinance existing debt as well as provide cash for infrastructure investment.
DIFC Investments, the investment arm of the company running Dubai’s financial free zone, is seeking to raise as much as $700 million by issuing a sukuk to help repay existing debt and fund real estate development, its top executive said on Sunday.
The company aims to finalise the ijara-structured deal by the end of October, Essa Kazim, governor of the Dubai International Financial Centre (DIFC) and chairman of DIFC Authority, told reporters at a media event.
Ijara is a leasing arrangement commonly used to structure Islamic bonds.
Chief Financial Officer Rajesh Pareek said the lifespan of the dollar-denominated trade had yet to be finalised and a group of local and international banks had been chosen to arrange the transaction, although he declined to name which ones.
IFR, a Thomson Reuters unit, reported last month that DIFC Investments was planning a sukuk, with the key banks on a 2012 loan deal among those involved in arranging the new deal.
DIFC took out a $1 billion syndicated loan in May 2012 with Emirates NBD acting as financial adviser, while Standard Chartered coordinated the debt. Dubai Islamic Bank and Noor Bank also participated in the loan.
Proceeds from the issue will be used to refinance the around $650 million of the loan that remains, with the remainder earmarked for investment in real estate by the DIFC, Kazim said.
The DIFC has boomed since it was set up as a financial free zone in 2004, becoming the Middle East’s top banking hub. The number of registered firms operating in the DIFC jumped 7 percent in the first half of 2014 to 1,113, according to figures released on Sunday.
However, it has not come close to competing with the likes of Luxembourg, Dublin and the Cayman Islands as a top domicile for funds.
Rapidly expanding financial markets and rising incomes in the Gulf suggest there is room for a fund management hub to develop in the region.