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Dubai set for dollar bond sale

Issac John
Filed on September 28, 2010

DUBAI Dubai will launch a dollar-denominated sovereign bond soon, the government announced on Monday.

The government, acting through the Department of Finance, said it had hired Standard Chartered, HSBC Holdings and Deutsche Bank AG for the bond sale, its first since the start of the credit crisis last year.

The fixed-coupon bond offering is part of Dubai’s $4 billion euro medium term note, or EMTN, programme, which was established in April 2008.

“The bond, the proceeds of which will be used for general budgetary purposes, is expected to be launched shortly, subject to market conditions,” the Department of Finance said in an e-mailed statement, without giving a more specific timeframe.

Although the size of the bond was not specified in the statement, various reports suggest that it could be worth $1 billion.

For legal reasons, the bonds will not be for sale in the United States, Japan, Australia or Canada, the statement also said.

Analysts suggest the move underscored increasing global investor confidence in Dubai following the successful $23.5 billion debt restructuring deal reached with creditors by Dubai government-owned conglomerate Dubai World.

“The response for bond, Dubai’s first debt sale since last year’s debt crisis, will help assess the level of investor sentiment in the emirate’s economy,” they said.

The Dubai Department of Finance held a series of non-deal, fixed-income investor meetings in Asia in August and in Europe in June to gauge investor interest in a potential issue. According to the department, the roadshows were part of a strategy of providing regular updates to both existing and prospective fixed-income investors around the world on Dubai’s economy.

Dubai’s most recent sovereign bond sale was launched in October 2009. Dubai’s firms face some $30 billion in bond and loan maturities in the next two years alone.

In April, the Dubai Electricity and Water, the state-owned utility, successfully raised $1 billion through five-year bonds, yielding 8.5 per cent. The Dubai Government has made a detailed financial disclosure in a prospectus to support its $4 billion bond programme.

The prospectus published on the London Stock Exchange shows that Dubai projected deficit would be Dh5.99 billion this year, narrowing from Dh12.9 billion last year. Revenue is expected to rise by 3.5 per cent to Dh29.4 billion in 2010, while spending is forecast to drop 14.5 per cent to Dh35.4 billion.

The document shows the Dubai Government’s outstanding direct debt at $29 billion at the end of July.


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