Tuesday, May 24, 2011


 
   By Mirna Sleiman 
   Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Emirates Airline's planned bond issue will likely attract strong investor demand given the financial clout of the world's largest international carrier by traffic and the Dubai-based firm's aggressive expansion plans, bankers say.

"Interest rates are low, Dubai related credits are trading at their tightest levels in a while, and Emirates is a blue-chip name in the region," said Abdulkadir Hussain, chief executive officer of Mashreq Capital in Dubai.

Emirates Airline said late last week it had mandated banks and would undertake a roadshow "with a view to launching a bond if market conditions, including pricing, are favorable".

One of the banks hired to arrange the deal told Zawya Dow Jones that Deutsche Bank, Emirates NBD, HSBC Holdings Plc, and Morgan Stanley would all be involved in the dollar-denominated bond. The carrier met fixed-income investors in Hong Kong on Monday and will meet investors in Singapore on Tuesday, and in Dubai and Abu Dhabi on Wednesday. It has also scheduled meetings in London on Thursday and Geneva on May 30.

The last time Emirates tapped the debt markets was in late 2007, according to bankers. It's return shouldn't come as a surprise, however, given the airline's strong financial footing. The carrier earlier this month posted a record 55% rise in full-year net profit to $1.5 billion.

"Liquidity in the market is strong and the company is doing great," said Nadi Bargouti, managing director, asset management at Dubai-based Shuaa Capital.

"The market is hungry for such a product [bond] and the timing cannot be better. I think demand for an Emirates branded bond will be fantastic. We will have to wait and see how it will be priced," he added.

SPENDING PLANS

Any funds raised could help Emirates bankroll its ambitious spending plans. Last year, the carrier increased orders for new aircraft, adding 32 additional Airbus A380s and 30 Boeing 777-300ERs for a combined value of $13.4 billion, bringing the airline's total number of aircraft on order at the end of the financial year to 193, worth over $66 billion.

The carrier plans to have a total of 235 aircraft by 2017, adding 87 aircraft to its current fleet, according to its preliminary prospectus for the planned dollar-denominated bond sale.

An Emirates Airline bond would also represent another vote of confidence in Dubai's economy, say some analysts.

Sentiment surrounding Dubai has been boosted by the $25 billion debt restructuring agreement hammered out between state-owned conglomerate Dubai World and its creditors. But even before this, Dubai sold a $1.25 billion sovereign bond late last year, an issue that was four times oversubscribed, amid signs of economic recovery and improved confidence in the emirate.

But while an Emirates Airline bond issue may show that investors are now prepared to take on more Dubai risk, the absence of a sovereign credit rating, as well as a corporate rating for Emirates, remains an obstacle to widening the range of participants beyond those willing to just accept emerging market risk.

"I suspect demand will only be limited by the fact that's its an unrated deal. Other than the rating issue, I expect the deal to do well and demand to be high," Mashreq's Hussain said.

-By Mirna Sleiman, Dow Jones Newswires; +9714 446-1698; mirna.sleiman@dowjones.com

Copyright (c) 2011 Dow Jones & Co.

(END) Dow Jones Newswires

24-05-11 0902GMT