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$1.25 billion Dubai bond is launched

Issac John
Filed on October 1, 2010

DUBAI — Dubai on Wednesday embarked on a fund-raising drive by launching a $1.25 billion bond, its first sovereign issue since the 2009 debt crisis.

The dual-tranche Eurobond sale drew stronger-than-expected global investor appetite with order books for the sale exceeding $5 billion, four times oversubscribed, the government media office announced on Wednesday.

The $500 million tranche that matures in five years carries a yield of 6.7 per cent while the $750 million 10-year tranche promises 7.75 per cent, which analysts termed as quite attractive.

“We are very pleased at the positive market reception to the bond offering, which demonstrates increased investor confidence in the strong long-term value proposition of the emirate of Dubai,” said Abdulrahman Al Saleh, Director-General of the Department of Finance.

“The government has taken prudent measures to control costs and manage its budget deficit and this successful issuance provides Dubai with additional liquidity for general budgetary purposes,” Al Saleh said in a statement.

The government said the bond sales was “extremely well received globally and generated a large order book with over 370 orders made by a wide range of high quality fixed income investors, including fund managers, insurance companies and banks”.

Taking cue of the sovereign bond issue’s overwhelming success, Dubai’s master builder Emaar Properties on Wednesday launched a convertible bond worth $375 million that has an increase option of $125 million and matures in December 2015. The bond, intended to help the UAE’s largest listed property firm to refinance short-term debt obligations, will be listed on the Luxembourg Stock Exchange.

Another Dubai company which is expected to follow suit is Nakheel, the property-developing arm of Dubai World. Analysts expect Nakheel to launch a Dh6 billion Islamic bond as part of its debt repayment plan. In April, the Dubai Electricity and Water Authority raised $1 billion through five-year bonds.

Experts believe the latest two bond sales are a clear signal to resurging investor confidence in Dubai’s future in the aftermath of the successful $23.5 billion debt restructuring deal reached with creditors of Dubai World.

A 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.

issacjohn@khaleejtimes.com


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