Tamweel postpones US$235 million residential mortgage-backed securities sale (By IFN)

UAE: Tamweel has held off on a US$235 million sale of residential mortgage-backed securities (RMBS) in a sign that investors are not yet ready to take on financing structures reminiscent of Dubai’s 2007 property crisis.

“Tamweel has decided not to proceed with the RMBS at this time based on market feedback,” said the company in a statement; days after it concluded investor meetings for the sale.
The deal would have marked the Shariah compliant mortgage provider’s return to the asset-backed securitization (ABS) market following its first foray in 2007. Tamweel appeared to have checked all the boxes in preparation for the sale; even issuing price guidance of between 335-345 basis points (bps) over one-month Libor and receiving provisional ratings from Moody’s of ‘(P)Aa3(sf)’ for the certificates.

However, the transaction seems to have proved too provocative for investors, whose only other GCC-based Islamic ABS was Tamweel’s 2007 issuance. That sale comprised a US$210 million issuance priced at 35 bps over one-month Libor, 300 bps less than the guidance for the postponed deal.

The postponement should hardly come as a surprise. Tamweel’s roadshows for the would-be issuance ran from the 19th June through to the end of the month; while its issued price guidance for the papers, due in 2046 but callable after five years, was on the 26th June. Unlike other debt sales which often see papers taken up soon after pricing, the lag in Tamweel’s issuance timeline suggested something about the attempted sale was amiss.

Market observers noted that Tamweel may have been trying to do too much, too soon; as ABS transactions require issuers to ring-fence top quality assets, of which Tamweel’s ownership may be limited. Additionally, the deal, to be backed by Dubai real estate, may have given investors jitters as memories of the emirate’s property crash linger, despite signs of a recovery in the sector.

Nonetheless, the company should not be too disheartened. It successfully issued US$300 million-worth of plain vanilla Sukuk earlier this year, guaranteed by its parent Dubai Islamic Bank and priced at 5.15%.

The varying success between its Sukuk and ABS should signal to Tamweel that while investors have accepted it back into the fold, the time has yet to come for the mortgage provider to offer more complex financing structures.

See: http://redmoney.newsweaver.co.uk/2k5sw39dgahh38rwoni3wx?email=true&a=6&p=25609605&t=21594715