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Wed 25 Nov 2009 02:14 PM

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Dubai raises further $5bn in bond sale

UPDATE 3: Amount raised will meet emirate's current needs and obligations - Dep't of Finance statement.

Dubai officials on Wednesday announced that it has raised a further $5bn as part of its $20bn long term bond programme launched at the beginning of 2009.

The amount issued would meet the "emirate's current needs and obligations", Dubai's Finance Department said, adding that it was a five-year bond priced at four percent.

"The $5 billion tranche was fully subscribed equally by National Bank of Abu Dhabi and Al Hilal Bank and has been divided according to a schedule that specifies drawdown amounts," a statement added.

The first amount scheduled to be drawn down is $1bn and will be split equally between a conventional bond issuance to NBAD and a sukuk to Al Hilal Bank, it said.

“I think the capital raised will be primarily used to finance maturities of key Dubai entities. I believe there would be some level of renegotiation with creditors, which may allow for some push outs in repayments,” Saud Masud, head of research and senior analyst for real estate in the Middle East and North Africa at UBS, told Arabian Business.

By placing the issue with banks, Dubai was demonstrating a measure of independence from Abu Dhabi, the capital and the wealthiest of the seven emirates that comprise the UAE federation, Mohammed Shakeel, Mideast economist at the Economist Intelligence Unit, told Reuters.

But economist Monica Malik at bank EFG-Hermes in Dubai, added: "Although it has not come from a federal source ... both of the banks are Abu Dhabi-government controlled banks. It's in line with our view that there will be limited pure-private interest."

Dubai set up a $20 billion Dubai Financial Support Fund after the financial crunch hurt its property, finance and tourism industries.

The emirate raised $10 billion by selling bonds to the UAE central bank in February.

Both NBAD and Al Hilal Bank are majority-owned by the Abu Dhabi government through the Abu Dhabi Investment Council, or ADIC.

Al Hilal Bank is fully-owned by ADIC, while NBAD is 70.5 percent owned by the entity, according to Zawya.com data, Zawya Dow Jones reported.

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