Kuwait's Investment Dar is arranging $1.5 billion in floating rate Islamic bonds in 2006, most of which will fund regional real estate projects, company officials told Reuters in an interview.
Chairman and Managing Director Adnan al-Musallam also said he was more than confident the Islamic investment firm's profits would be strong this year and another top official said the market heavyweight saw decent" profit growth in 2006.
"Investment Dar and some subsidiaries are in negotiations now with a number of foreign banks to arrange these sukuks (Islamic bonds)," Musallam told Reuters on the sidelines of a company function.
Musallam, whose firm has $5.5 billion under management or control, said a $400 million bond will go towards funding newly founded Khabary Holding, a real estate company that will build a "Future City" development south of Kuwait City with a total value of $800 million to $1 billion.
Musallam said according to an initial agreement with some international banks, an $800 million Islamic bond was also being negotiated for Oqyana Real Estate Company, involved in a major $4 billion development project in Dubai.
"Those sukuks will be for $800 million," Musallam said.
Investment Dar and strategic partners each own 20 percent plus of Oqyana which has capital of 250 million Kuwaiti dinars ($856 million), fully subscribed in December 2005 in the largest private placement in Kuwait's history.
Amr Abou El Seoud, Investment Dar's assistant general manager, said his firm also planned a $300 million Islamic bond issue in the second quarter to fund its own operations.
Abou El Seoud said all three Islamic bond issues will be dollar-denominated and will probably be priced at 1 percent over six-month LIBOR if the issues are rated and 1.25 percent to 1.50 percent over LIBOR if they are not rated.
"This is a securitisation type of bond, a Musharaka Sukuk," he said. "In this one we have offers from two of the banks to be fully underwritten from day one."
In a regular Islamic bond, bond holders have real estate as collateral but in a Musharaka Sukuk a special purpose vehicle is created from a mix of assets that include receivables such as real estate and some lease products, a sort of securitisation.
Banking sources told Reuters the banks involved in the three bonds talks included UBS, Standard Chartered Middle East and Germany's WestLB.
STRONG 2006 EARNINGS SEEN:
Asked if he was confident Investment Dar will have strong earnings this year, Musallam said: "I am more than confident." He declined to give specific targets, citing bourse laws.
In 2005, Investment Dar's net profit grew threefold to 80.5 million dinars ($275.3 million), of which 35 million was in "unrealised earnings", or portfolio gains that have not been liquidated to realise the earnings. The firm is in the top 10 in Kuwait's bourse in terms of market capitalisation.
Asked to give a forecast for 2006 profits, Abou El Seoud said: "We expect profit growth ... We expect decent growth."
Musallam said the company would not change its overall conservative investment approach this year so would not be impacted by a major Kuwait bourse slump since the start of 2006.
"We don't speculate in the bourse," Musallam said.
Abou El Seoud also told Reuters that Investment Dar intends to list three subsidiaries on the Kuwait Stock Exchange this year, including Khabary which is due to be quoted in May.
Manazel Holdings, a home builder set up in 2005 with a 65 million dinar capital, will list in June and Rehal Logistics, a transport firm, will have its market debut in October, he said.
Musallam said Investment Dar intended to set up a new Islamic investment firm in Saudi Arabia with a capital of $160 million, in which it will hold a 35 percent stake.
Investment Dar will also set up the first Islamic bank in Syria, together with Syrian, Kuwaiti and Saudi investors after Damascus issued a new law for Islamic banks.
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