Investors keen to get on board flydubai

Debut sukuk oversubscribed six times to $3b

Dubai — Investors are keen to get on board with flydubai as its five-year debut sukuk was oversubscribed six times to $3 billion and the proceeds will be used for general corporate purposes and refinancing.

“This is a highly-successful result that further confirms the credibility of flydubai and the investors’ confidence in the promising outlook for flydubai, and Dubai’s status as a leading global aviation hub,” flydubai Chairman Shaikh Ahmed bin Saeed Al Maktoum said in a statement.

Owned by Dubai Aviation Corporation, flydubai came to the market with a landmark debut Islamic bond transaction and successfully raised $500 million through a five-year sukuk. The order book was over six times oversubscribed demonstrating the strong investor appetite for this paper. The sukuk priced at a profit rate of 3.776 per cent, equivalent to 200 basis points over the five-year US dollar mid-swaps.

“We are very pleased at the excellent market reception to flydubai’s landmark sukuk issue. The highly-successful offering demonstrates the confidence which international investors place in the emirate of Dubai and its entities and confirms the access to funding which our corporates enjoy from Islamic capital markets. The outcome is a testament to the invaluable support provided by the Government of Dubai to our institution and the wider industry, and part of the ongoing visionary leadership of His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai,” said Shaikh Ahmed, who is also President of the Dubai Civil Aviation Authority, Chairman of Emirates airline and Chief Executive of the Emirates Group.

The issuance was extremely well-received globally and generated a large order book with over 150 investors placing orders of approximately $3 billion. Orders were received from a wide range of high-quality fixed-income investors, including fund managers, private banks and banks from a wide geographic spread across Asia, Europe, the Middle East and offshore US. The high-quality and diversified order book enabled flydubai to price the transaction at a very tight spread, after two price revisions.

The five-year sukuk issuance saw a geographic distribution of 64 per cent to Middle East accounts, 25 per cent to European accounts, 7 per cent to Asia and an additional four per cent to US offshore.

In terms of distribution among types of investors, the sukuk saw a diverse allocation with 65 per cent to banks, 20 per cent to fund managers, eight per cent to private banks and an additional seven per cent going to other types of investors.

Given flydubai’s high profile in the GCC and now its international reach, the launch of the sukuk not only provides a secure additional revenue stream, but it also provides investors with assurances about the long term security and financial discipline that the carrier has, according to a senior aviation analyst.

“Given the heightened interest in this debut sukuk for flydubai, this certainly will be the start of more to come as the airline expands and takes deliveries of its huge 737 MAX 8 fleet from 2017,” Saj Ahmad, chief analyst at London-based StrategicAero Research, told Khaleej Times in an e-mailed statement. The joint lead managers on the transaction were Credit Agricole CIB, Dubai Islamic Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi, Noor Bank and Standard Chartered Bank.

• abdulbasit@khaleejtimes.com