By Yousef Saba and Davide Barbuscia- Dubai's Meraas Holding, a state-linked property developer, plans to tender its existing U.S. dollar-denominated Islamic bonds for cash and issue new sukuk to replace them, three sources familiar with the matter said.

Meraas' $600 million sukuk, or sharia-compliant Islamic bonds, issued in 2017 fell sharply in value in March last year to 80 cents on the dollar as the coronavirus pandemic hit an already struggling real estate sector in Dubai.

The paper however shot up in value in June, following an announcement that the firm would be brought under the umbrella of the ruler of Dubai's investment vehicle, Dubai Holding.

The sukuk were trading at 100.5 cents on Tuesday, according to Refinitiv data.

Meraas did not immediately respond to a Reuters request for comment.

One of the sources said the tender for the existing sukuk would be conditional on the successful issuance of new Islamic bonds, which would likely also have a five-year tenor.

Earlier this year, Meraas completed a buyout of shares it did not already own in the loss-making theme park group DXB Entertainments.

Meraas' fundraising would come as Gulf borrowers seek to raise cash or improve the terms of their existing financing to reflect better market conditions and lock in low rates ahead of an eventual policy tightening by the U.S. Federal Reserve.

(Reporting by Yousef Saba and Davide Barbuscia; Editing by Emelia Sithole-Matarise) ((Yousef.Saba@thomsonreuters.com; +971562166204; https://twitter.com/YousefSaba))