Dubai's Emirates may boost five-year bond issue to $1bn

Emirates, the world’s biggest airline by international traffic, is said to be increasing an issue of five-year bonds to $1bn and cutting the yield spread offered to investors.

The Dubai-based carrier initially proposed a $500m issue at a spread of 350 basis points more than the benchmark mid-swap rate. The increased deal will be priced at 330 basis points, according to three bankers familiar with the sale who wouldn’t be identified before the issue is completed.

“What we’ve seen over the course of the week where the pricing guidance tightened to midswaps plus 330 and upsized to $1bn shows the market’s underlying confidence in the strength of credit by Emirates,” said Mark Watts, head of fixed income at National Bank of Abu Dhabi’s asset management group, which manages AED4.1bn ($1.1bn). It’s a “testament to the fact that it’s a very supportive market at the moment,” he said.

The airline hired Deutsche Bank, Emirates NBD, HSBC Holdings and Morgan Stanley to manage the sale. The airline plans to use the money as a “security measure” to meet its obligations when the need arises, the carrier’s President Tim Clark said May 29.

Emirates, which reported record profit of AED5.93bn for financial year ended March 31, has a cash pile of AED16bn.

“We are still waiting on the final market response which will dictate whether we go ahead with the bond. A decision on this is likely to be made today,” Emirates said in an e-mailed statement.