Dubai: Dubai mortgage lender Tamweel could sell as much as $1.1 billion of Islamic bonds by the end of the third quarter to fund expansion, the company's chief executive said yesterday.
The money will be used to boost its mortgage finance business in the UAE and to expand into Egypt and Saudi Arabia, the largest Arab economy, Adel Shirawi told Reuters.
Tamweel plans to sell $500 million of Islamic bonds, or sukuk, and $300 million of convertible sukuk, which will give investors the right to exchange the bonds for Tamweel's shares, he said.
Islamic bonds are typically backed by physical assets that pay a dividend or rent to bondholders rather than interest, which Islam equates with usury.
"The $500 million sukuk could be finished in six months, and the convertible faster than that," Shirawi said.
Tamweel said on Saturday it would allow foreigners to own up to 40 per cent of its shares to prepare for the convertible sukuk sale.
Tamweel is also looking to sell $300 million of Islamic bonds backed by residential mortgages, in what could be the first real securitisation in the UAE.
"We should conclude this milestone deal in the next couple of months," he said. The asset backed securities would have a maturity of 15 years, he said.
The UAE's first securitisation was a $350 million bond sold in 2005 by Emirates National Securitisation Corp. The bond was backed by a cash deposit and so is not consider real securitisation.
Tamweel is considering expanding into Saudi Arabia and Egypt as its first international ventures, Shirawi said.
Saudi Arabia is preparing a mortgage law as part of plans to meet demand from a rapidly growing population. The kingdom, the world's top oil exporter, will need to build 1.5 million homes by 2015, Al Rajhi Banking & Investment Corp. estimated in January.