Good demand for Dubai bond

With order books overfilled, the emirate is well placed to negotiate the yield

By Yazad Darasha. Business News Editor
00:00 September 29, 2010
Dubai Metro

Dubai: Dubai's latest foray into the global debt market has prompted a good response, and final pricing on the dollar-denominated Eurobond issue may take place as early as today, people familiar with the situation said.

According to one person, the bond will be split into two tranches of $500 million (Dh 1.836 billion) each with different tenors and pricing for each tranche. "The five-year tranche is looking at a yield guidance of about 6.75 per cent, while initial interest in the 10-year tranche is around 7.875 per cent," the person said.

Standard Chartered, HSBC and Deutsche Bank are the joint lead managers for the bond, which will be issued under Dubai's updated Euro Medium Term Note programme.

Initial reports suggest the order book for the bond was in the $2 billion ballpark. The higher the demand, the more room Dubai will have to negotiate the pricing downward. Jitendra Gianchandani, chairman of business consultancy JCA International said: "Dubai does not wait for opportunities, it creates them. Dubai has already successfully launched bonds during the global crisis — a government issue in October 2009 and by the Dubai Electricity and Water Authority issue in April 2010. I see no reason for the current issue being unable to attract significant subscription and attractive pricing.

"The emirate has delivered on its promises. Examples are the successful restructuring of Dubai World debt, the opening of Al Maktoum International Airport, and the continuing expansion of Dubai Metro," he said.

According to a supplementary prospectus filed in regard to the bond issue, the Dubai Government has accepted the "significant impact" the global crisis has had on the emirate's economic plans and has begun the process of re-assessing the goals of the Dubai Strategic Plan 2015.

Dr Armen V. Papazian, financial economist and chief executive of Keipr, a boutique consultancy specialising in business analytics and intelligence said: "It is also crucial to identify the right sectors from a space value perspective. I believe Dubai's restructuring plans and the federal and central bank support to the emirate will ensure there is sufficient demand for the issue," he said.