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Wed 29 Sep 2010 03:11 AM

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'Dubai 5 year bond may yield about 6.875%' - bankers

New issues are being well received by the market, which is attracting demand.

'Dubai 5 year bond may yield about 6.875%' - bankers
NOTE SALE: Dubais sale of five year dollar notes, the first issue since the Dubai World credit crisis, may be priced to yield at 6.875%. (Getty Images)

Dubai’s sale of five year dollar notes, the first issue since the Dubai World credit crisis, may be priced to yield about 6.875 percent, according to four people with knowledge of the sale.

The Arabian Gulf financial hub’s 10 year bonds may be priced to yield about 8 percent, the people said, declining to be identified because the information hasn’t been made public.

Dubai’s 6.396 percent Islamic bonds maturing 2014 were trading at a yield of 6.435 percent, up two basis points, at 2:12 pm in the emirate, according to prices on the Bloomberg.

In an email today, Stuart Culverhouse, chief economist for investment bank Exotix Ltd in London, said: “We think the pricing on the five year looks tight. New issues are being well received by the market at the moment, so this will attract demand, and of course, Abu Dhabi backstops credit risk.”

Emerging market bond sales have raised $75.5 billion so far this month, an increase of 38 percent compared with September 2009, according to data compiled by Bloomberg.

Dubai’s sale will be the first by the emirate after state owned holding company Dubai World announced plans in November to delay payments on $24.9 billion of debt, roiling global markets.

The sheikhdom borrowed $20 billion last year from wealthier neighbor Abu Dhabi, which holds about 7 percent of the world’s proven oil reserves, and the UAE government.

Some of Dubai’s state owned companies have struggled to repay debt after frozen credit markets prevented them from raising new loans and as property prices fell.

Dubai World said Sept 10 creditors holding more than 99 percent of the value of its loans approved its restructuring plan.

The emirate borrowed $109.3 billion as it transformed itself into a financial, logistics and tourism hub, with about $15.5 billion of debt due this year, the International Monetary Fund estimates.

Dubai hired Deutsche Bank, HSBC Holdings and Standard Chartered as joint lead managers for a dollar bond offering, the government said in a statement yesterday. The sheikhdom expects the notes to be sold subject to market conditions, with the money used for the general budget, it said.

The government last sold bonds in October last year, when the Department of Finance raised $1.93 billion from five year Islamic notes.

In the same month, the emirate set up a $2.5 billion Islamic medium term note program and a $4 billion plan to sell regular bonds. Dubai has yet to seek a credit rating.

The Dubai Department of Finance held a series of investor meetings in Asia in August and in Europe in June aimed at providing updates to existing and prospective bondholders around the world on the emirate’s economy, it said at the time.

Dubai Electricity & Water Authority was the last government owned entity to tap capital markets since the Dubai World debt announcement. The utility sold $1 billion of five year bonds with a yield of 8.5 percent in April.

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