Gulf Arab emirate is tapping debt markets again following 2009 crisis
Dubai has mandated four banks for a sovereign bond issue of up to US$1.5bn which may be launched as early as this week, two sources familiar with the matter told Reuters on Tuesday.
The Gulf Arab emirate, which has been slowly recovering from a crippling 2009 debt crisis, is tapping debt markets again nearly a year after it issued a US$500m bond.
It selected HSBC Holdings, Citigroup, Dubai Islamic Bank and National Bank of Abu Dhabi for the issue, said the sources who spoke on condition of anonymity.
"The books will open soon, probably tomorrow or the day after," said one source familiar with the matter.
The government is mulling a dual-tranche dated issue which may be an Islamic bond, or sukuk, said one of the sources. The inclusion of Dubai Islamic Bank on the deal indicates the government will likely opt for an Islamic structure.
Dubai set up a US$4bn medium-term notes programme in 2008 which it raised to US$5bn last year. It recently updated its bond prospectus.
The emirate last tapped debt markets in 2011 when it issued the US$500m, 10-year bond with a five-year put option, allowing investors to redeem their investment ahead of maturity at full value.
That bond was last bid at near 103 levels, according to Thomson Reuters data, to yield 5.2 percent.
Helped by an economic revival in trade and tourism and its safe-haven status amid the Arab Spring civil uprisings, Dubai is recovering from the depths of its debt crisis.
The emirate is still battling to reduce or restructure debt levels at state-linked firms. Investors are closely watching a pair of significant upcoming maturities at Jebel Ali Free Zone (JAFZA) and DIFC Investments. The two have a combined US$3.2bn due in 2011.
Dubai's 2012 budget has a shortfall of US$498m, a smaller deficit than 2011 as spending on development projects in the debt-laden Gulf Arab emirate decreased.
The emirate's five-year credit default swaps have narrowed dramatically since the emirate was hit by the debt crisis.
Spreads stood at around 370 basis points on Tuesday, far below levels of around 650 basis points hit after its flagship conglomerate Dubai World announced it needed to restructure some US$25bn in debt in late 2009.