- Arada’s $400 Million Sukuk Shows Capital Is Available but Only for Credible Borrowers
Capital remains available to companies with strong assets and convincing repayment plans, but elevated oil prices, high sovereign bond yields and growing geopolitical uncertainty are forcing lenders to become more selective about the risks they are prepared to finance.
Brent crude was trading around $114.50 per barrel on October 26 after gaining 6.20% during the previous week, while the yield on the benchmark 10-year United States Treasury remained close to 4.97%.
Together, these indicators point to a financial environment in which inflation risks remain elevated and the cost of borrowing is unlikely to fall quickly. Higher oil prices can raise transport, production and utility costs, while high Treasury yields increase the minimum returns global investors expect from corporate bonds, property debt and emerging-market investments.
The Federal Reserve is expected to leave its policy rate within the 3.75% to 4.00% range at its next meeting. However, persistent inflation means companies cannot assume that monetary easing will arrive soon enough to rescue weak financing structures.
For businesses facing debt maturities, the danger is therefore not limited to the possibility of another interest-rate increase. The deeper risk is that debt raised under more favourable conditions may have to be refinanced in a market demanding higher returns, stronger collateral and clearer evidence of sustainable cash flows.
Arash Jalali, Chief Executive and Co-Founder of UAE-based financial advisory group Revona, argues that companies must stop treating financing as an event that begins only when cash is urgently required.
“The key issue is not simply where interest rates go next,” he said. “It is how businesses and investors prepare their balance sheets for a market where borrowing costs remain elevated.”
His warning goes to the heart of the current refinancing challenge. Companies may remain profitable on paper but still encounter financial stress if the timing of their debt repayments does not match the timing of their cash receipts.
A property developer, for example, may own valuable land and have a strong pipeline of projects, but still struggle if significant debt matures before sales proceeds or rental income become available. The quality of the assets matters, but liquidity determines whether the company can continue operating without selling those assets at distressed prices.
The latest sukuk issued by Sharjah-based property developer Arada offers a practical illustration of both the opportunities and costs associated with the present market.
Arada raised $400 million through a five-year Islamic bond carrying an 8.875% coupon and a yield of 9.00%. Investor orders exceeded $650 million, enabling the developer to price the transaction below its initial yield guidance.
The size of the order book indicates that investors remain willing to finance property businesses despite elevated global rates and increased regional uncertainty. However, the 9.00% yield also demonstrates the premium borrowers must pay to attract that capital.
The transaction was reportedly the first public debt issuance by a UAE property developer since the United States-Iran conflict began in February. Its completion therefore represents more than a routine fundraising exercise. It provides a test of whether international investors remain prepared to assume real-estate and regional risks during a period of heightened geopolitical tension.
Part of the proceeds will be used to refinance Arada’s existing obligations, including a tender offer for sukuk scheduled to mature in 2027. The remaining funds will support future capital requirements.
That combination is important. The company is not waiting until the existing debt reaches maturity before approaching investors. It is attempting to reduce refinancing uncertainty while preserving resources for project delivery and future growth.
“Refinancing and growth funding need to be considered together,” Mr Jalali said, arguing that developers must protect their ability to complete projects while managing maturities and retaining adequate liquidity.
For property companies, this requires financing structures that reflect construction schedules, customer payments, operating expenses and the maturity dates of existing obligations. Borrowing for five years may appear attractive, but it becomes dangerous when the underlying project requires seven years to generate sufficient cash.
The same principle applies outside real estate. Manufacturers must align debt servicing with production and sales cycles, while commodity businesses must test whether obligations remain manageable when market prices fall. Investors with leveraged portfolios must similarly understand how long their assets could take to sell during a market downturn.
Recent weakness in UAE equities reinforces the need for such planning. Dubai’s benchmark index declined by 1.40%, while Abu Dhabi’s fell by 1.20% as concerns about regional security and possible energy-supply disruptions affected market sentiment. Banking and property stocks were among those exposed to the sell-off.
A decline in share prices does not necessarily mean that the underlying businesses have suddenly deteriorated. It can, however, complicate fundraising by lowering market valuations, weakening investor confidence and raising the return demanded by new providers of capital.
Companies that approach lenders only after market conditions have worsened may therefore find that financing is available on significantly less favourable terms. They may be forced to accept higher interest rates, additional collateral requirements, tighter financial covenants or restrictions on dividends and future borrowing.
The private-credit market, once regarded as an increasingly accessible alternative to bank finance, is also showing signs of greater caution. Direct-lending volumes reportedly fell to $38.90 billion during the third quarter, the lowest level since the second quarter of 2023.
More private-credit borrowing also moved into conventional bank loans than in the opposite direction during 2026, suggesting that some borrowers are finding bank refinancing more competitive or better suited to their needs.
This does not mean private credit is retreating permanently. It means alternative lenders are becoming more disciplined about asset quality, leverage and repayment capacity.
Private credit can provide speed and flexible structures, particularly for businesses unable to satisfy traditional bank requirements. But that flexibility frequently comes at a higher cost. Borrowers must therefore consider the total burden of a facility including fees, collateral, covenants and refinancing conditions—rather than concentrating only on the amount offered.
The broader lesson from Arada’s issuance is that demanding market conditions do not close capital markets equally to every borrower. Companies with credible assets, transparent accounts and clearly defined uses for their proceeds can still attract substantial investor demand.
Yet raising money is not the same as building financial resilience.
A successful bond or sukuk issue can postpone a maturity, but it cannot correct an unprofitable business model or permanently bridge a mismatch between debt and cash generation. Refinancing becomes sustainable only when it creates sufficient time for the underlying business to generate the resources required for repayment.
For businesses and investors, three priorities follow: examine debt maturities well before they fall due, align repayment schedules with realistic cash-flow projections and assess the entire balance sheet before taking on additional obligations.
Arada’s $400 million sukuk shows that global investors have not abandoned property debt. What has changed is the price of their confidence. In a market shaped by $114 oil, near-5% Treasury yields and geopolitical uncertainty, money will continue to move but increasingly towards borrowers that can demonstrate discipline before they need rescuing.
