Tuesday, Apr 24, 2012
--Dubai plans bond sale, after last tapping the market in June 2011
--Proceeds to be used for budgetary reasons, refinancing of government debt
--Targets regional and international investors
(Adds comments from Mashreq Capital CEO in paragraphs 4, 5 and 8)
By Leila Hatoum
Of ZAWYA DOW JONES
DUBAI (Zawya Dow Jones)--Dubai plans to issue Islamic bonds, or sukuk, worth about $1 billion this week and has mandated four banks to arrange the transaction, a senior government official told Zawya Dow Jones Tuesday.
The bond proceeds will be used for budgetary reasons and for the refinancing of government debt, the official, who declined to be identified, said.
The emirate has mandated Dubai Islamic Bank, National Bank of Abu Dhabi, HSBC and Citi for the potential sale, he said, adding no road show has been planned and the sukuk could be issued as early as today.
Abdul Kadir Hussain, chief executive of Mashreq Capital in Dubai, said the planned sukuk should generate strong demand.
"Just the fact that they're doing this without a full-blown roadshow is an indication that the underwriters are confident there is enough demand to do it quickly," he said. He added the sukuk will have a five and 10-year tranche, while price guidance on the 5-year is about 5% and for the 10-year is about 6.5%.
A bond issue would mark the first time Dubai has tested credit markets since June 2011 when it issued a 10-year bond worth $500 million, one that attracted orders over $1.8 billion.
The emirate's economy has been enjoying a sweet spot of late with the city-state benefiting from a boom in logistics, transportation, tourism and trade. Some government officials expect Dubai's economy to grow by as much as 4.5% this year, compared with 3% in 2011.
"The story (Dubai) is definitely turning around, the numbers are looking better, debt pay-downs have happened and restructurings have happened," said Mashreq's Hussain.
On top of this, Middle East capital markets have benefited from the revival of global risk appetite and the high credit standing of many Arab Gulf issuers at a time when some investors are shunning European debt.
The Dubai government and some of its affiliated companies have successfully tapped the financial markets several times since the state-controlled Dubai World shocked financial markets by announcing a standstill on its debt repayments in November 2009. Dubai World, including its then affiliate Nakheel, subsequently finalized a $25 billion debt restructuring deal.
Dubai set up a $5 billion euro medium term notes, or EMTN, program last year.
-By Leila Hatoum, Dow Jones Newswires; +971-4-446-1686; leila.hatoum@dowjones.com
(Asa Fitch in Dubai also contributed to this article.)
Copyright (c) 2012 Dow Jones & Co.
(END) Dow Jones Newswires
24-04-12 1238GMT
