Dubai’s National Bonds eyeing Nakheel sukuk

  • Share via facebook
  • Tweet this
  • Bookmark and Share
Mohammed Qasim Al Ali, CEO of National Bonds Corp

Mohammed Qasim Al Ali, CEO of National Bonds Corp

National Bonds Corp, the Dubai-owned Islamic savings scheme, may invest in the Nakheel sukuk issued to trade creditors in part-payment for outstanding bills, its CEO said.

The Islamic bonds issued under the government-owned developer’s $16.1bn restructuring plan tumbled in their first week of trading as holders flooded the market.

“Yes,” said Mohammed Qasim Al-Ali, when asked about NBC’s interest in the bonds. “Nakheel and others, which are floating in the market at really good yields.

“The corporate sukuk are now very lucrative, so we are investing in sukuk, especially as it is being traded at a discount, which increases the yield.

 “Being a UAE-based company, naturally we will look at the corporate sukuk issued in the UAE and the yields.”

NBC was acquired by Investment Corporation of Dubai in March, after the sovereign wealth bought the remaining 50 percent stake from local shareholders.

The state-owned builder of man-made islands off Dubai’s coast issued AED3.8bn ($1bn) of Islamic bonds to trade creditors after the developer was unable to pay them. One sukuk-holder invited six banks, including Morgan Stanley and Abu Dhabi Commercial Bank, to bid for about AED320m of Nakheel’s sukuk on Sept 20, two bankers familiar with the matter said Sept 19, declining to be identified because the information is confidential.

“There are more sellers than buyers,” said Mark Watts, head of fixed-income at National Bank of Abu Dhabi’s asset management group.

“Half of the game is doing good, solid, fundamental analysis, and knowing the supply and demand dynamics of the bond you’re holding. These trade creditors are not natural bondholders.”

Dubai’s property market had one of the world’s biggest reversals following the global credit crisis three years ago. Nakheel, which isn’t rated, delayed payments and wrote down its real estate by $21.4bn since 2008. The company cut jobs and halted projects including the man-made islands of Palm Deira and Palm Jebel Ali.

Nakheel received an $8.6bn bailout from Dubai’s government, helping it avoid default. The company got state funds to settle a $750m sukuk in January that last yielded 16.71 percent on Jan. 14, data compiled by Bloomberg show. Nakheel, a former unit of Dubai World, is now 100 percent government-owned but the bonds are not guaranteed by the government.

“Nobody knows where to price Nakheel’s sukuk,” said Adnan Haider, head of fixed income and equity at Abu Dhabi Commercial Bank.

“There aren’t that many trades printed, and there’s more sukuk coming into the market, so how do you determine the price?”

National Bonds said in May it had achieved sales of over AED1bn in the first five months of 2011, a rise of 29 percent on the year-earlier period.

Related:
Topics
Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

Please post responsibly. Commenter Rules

Posted by: sandpiper

Buying bonds that were issues as a result of one of the largest corporate disasters in history is not a great way to boost the credibility of the NBC. On the other hand, it is good to see a local company, presumably invested in by local people, effectively taking responsibility and underwriting the debts of Nakheel.

Enter the words above: Enter the numbers you hear:

All comments are subject to approval before appearing

Further reading

Features & Analysis
Saudi Arabia builds start-up culture with state oil money

Saudi Arabia builds start-up culture with state oil money

Gov't has previously has found it hard to promote start-ups in...

Why PE's back in vogue in the Middle East

Why PE's back in vogue in the Middle East

Confidence is returning to the Gulf’s private equity market after...

The curious case of David Haigh

The curious case of David Haigh

The story of how the former Leeds United boss went from football...

3
Most Popular
Most Discussed