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Tue 3 May 2011 04:36 PM

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Dubai road-toll plan said to get $1bn bids, tops target

The six-year financing may be priced at 3.5 percentage points over London interbank offered rate

Dubai road-toll plan said to get $1bn bids, tops target
BOND PLANS: Dubai received at least $1bn in bids for a programme to raise financing backed by future road-toll receipts

Dubai received at least $1bn in bids for a programme to raise financing backed by future road-toll receipts, more than the government’s target, said two bankers familiar with the plan.

There was strong interest from international banks, financial institutions and pension funds for the $800m securitisation program, one of the bankers said.

The six-year financing may be priced at 3.5 percentage points over the London interbank offered rate, both bankers said. They declined to be identified because the transaction hasn’t been completed yet.

Dubai, the Arabian Gulf business hub battling a debt crisis, said April 7 it hired Citigroup, Dubai Islamic Bank, Emirates NBD and Commercial Bank of Dubai to raise the financing to help fund transport projects.

The banks have put up the money for the dual-currency transaction and are offering portions of the securities to other investors. The offer includes both conventional and Islamic portions.

Securitisation is a process of issuing new securities backed by loans, mortgages, credit card debt or other assets like future income streams from a road-toll system.

Dubai, the second-biggest of the seven sheikhdoms that make up the UAE, had to seek help from neighboring Abu Dhabi after the global credit crisis pushed property prices down by more than half from their peak in 2008, and frozen credit markets forced some state-owned companies to delay loan payments.

State-owned Dubai World signed a final agreement with its creditors in March to restructure about $25bn of debt.

Dubai’s government last sold bonds in September, when it raised $1.25bn in a two-part bond sale in its first sovereign debt issue since the Dubai World credit crisis roiled global markets in 2009.

Its five-year, $500m note was priced to yield 6.7 percent, while the $750m10-year bond was priced to yield 7.75 percent. The bonds generated more than 370 orders valued at about $5bn, it said then.