Amlak resumes talks with creditors to renegotiate debt restructuring

The company had reworked part of its debt in 2014 and revised the terms of the deal in 2016

Amlak Finance receives 95 per cent approval on its debt restructuring terms from creditors. Sammy Dallal / The National

Amlak Finance, a Sharia-complaint home financier in Dubai, initiated talks with creditors to restructure its debt again.

The company had previously restructured its Dh10.2 billion investment deposits and settled Dh2.8bn in cash with financiers in 2014, and subsequently revised the terms of the 12-year deal in 2016, Amlak said in a statement on Wednesday to the Dubai Financial Market, where its shares are traded.

The restructure agreements have allowed for the resumption of normal business activity and enabled the company to pay Dh4.3bn, or 48 per cent of its total debt outstanding to financiers, and the redemption of Dh275 million or 21 per cent of its Mudaraba instrument.

“The current funding agreement imposed certain restrictive covenants on Amlak, which given the passage of time and changes in market dynamics and macro-economic factors proved to be detrimental to the long-term prospects of the company,” Amlak said.

The company “is approaching its financiers to renegotiate funding conditions to allow it more flexibility in adapting to current market conditions," it added. "This will provide Amlak with the opportunity to grow its business resulting in balance sheet growth and increased shareholder value.”

Amlak, which counts Dubai’s biggest listed developer Emaar Properties as its major shareholder, had also cited “restrictive covenants” in 2016 that 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 – for the reasons of revising the deal.

The company did not elaborate which of the provisions it seeks to renegotiate.

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Discussions have commenced and, subject to securing approvals from financiers and related authorities, is expected to be concluded by the second quarter of 2019.

Amlak, like its rival mortgage financer Tamweel and a number of banks with exposure to the home financing market, suffered after the 2008 property market crash when prices more than halved in some areas. Defaults on mortgages forced financial institutions to book losses and made it difficult for them to raise fresh funding to continue lending.

The property market rebounded in late 2011, however, it then softened due to a three-year slump in oil prices that began in mid-2014 and slowed the pace of economic growth. That reflected in more than 50 per cent decline in the Amlak full-year 2017 profit as revenues dropped. The company also reported an 11 per cent decline in the net income for the first nine months of 2018.

Since its successful restructure deal in 2014, Amlak said it made an advance payment of Dh758m to financiers in 2015. Its shares started trading again on DFM in June of the same year. The company made an advance payment of Dh274m the following year when it renegotiated the terms of the original deal. In 2017, Amlak paid an additional Dh100m that followed an advance payment of Dh684m in January 2018.