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Fri 11 Feb 2011 10:44 AM

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Dubai’s Emirates Airline picks banks for bond issue

State-backed carrier to tap international debt markets in bid to raise capital to fund fleet, expansion

Dubai’s Emirates Airline picks banks for bond issue
Emirates Airlines chief executive officer Sheikh Ahmed bin Saeed Al Maktoum
Dubai’s Emirates Airline picks banks for bond issue
Tim Clark President of Emirates Airline said "We are testing the waters to see if something like this would work" (ITP Images)
Dubai’s Emirates Airline picks banks for bond issue
Emirates Airline

Emirates Airline, one of the Arab world's largest carriers, is looking at financing options, its president said on Thursday, after reports the company had mandated banks for a bond issue.

Government-owned Emirates was understood to have picked Deutsche Bank, HSBC and Morgan Stanley for a bond sale, IFR Markets said, citing bankers away from the mentioned lenders.

"We are testing the waters to see if something like this would work," Emirates president Tim Clark said.

"It is an ongoing process and we do it all the time. There is no certainty whether or not a bond will be issued this year."

Sources told IFR that Emirates had been speaking to banks about fundraising options for the past couple of months and had decided to tap international debt capital markets.

One banking source said HSBC has been selected as one of the mandated banks, while another said Deutsche Bank had been involved in discussions with Emirates.

Emirates chairman Sheikh Ahmed bin Saeed al Maktoum said in November there were no plans to issue bonds or raise funds. This followed the announcement of a planned multi-billion dollar increase in its fleet to include 120 Airbus A380 superjumbos.

Emirates is Dubai's flagship company and one of the biggest contributors to a local economy hit hard by a property crisis.

The government-owned airline rivals longer established names for traffic between Europe and east Asia.

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NB 8 years ago

As long as the interest rates in the US are low, the institutonal investors appetite for GCC Corporate Bonds will remain high. Borrow @ 4-5% and invest for 7-8% - pretty good returns at these times. Emirates has quality assets and very strong and robust business model. Their bond will be easily oversubscribed 3-4 times.

Expat Writer 8 years ago

Another Dubai flagship asset...another bond!

Hard to believe that things are returning back to normal when you read stories like this.

John Smith 8 years ago

Interesting development. Emirates looking at a bond issue.

Telcoguy 8 years ago

@Expat Issuing a bond shows nothing about the financial health of the company. When you are paying upfront a very expensive asset (the plane) and you will make money over a long period of time selling the tickets, debt is the more reasonable way to finance.
Let see what the demand and the yield are, only then we can see what people really think.
And i mean the people who put their money where their mouth is.
@NB, if you think it is so easy, then you should try to play that game too. Keep in mind though that maybe the reason for the high interest rates is a higher risk. I find funny how people criticize arbitragers but they seldom seem to realize the risks involved in many of these deals.

His Excellency Dr Paul 8 years ago

"Emirates has quality assets"

I recall so did Dubai World... but it also turned out to have huge debts too.

Without transparency, it is hard to judge the real position of a company.

Emirates has a huge number of very big planes on order. One cannot help but notice the UAE has adopted rather strong arm tactics recently to try to get new landing slots in major markets. I wonder just how badly it is relying on getting those new slots?

Expat Writer 8 years ago

Telcoguy,

I would agree with you except for the fact that nearly all of EK's fleet is leased anyway (check on any airline database via a good search engine and you will see).

So if they dont own their planes, dont own their main hub (DXB International) then the only thing this bond can be for is to plug the gap in opex.

Telcoguy 8 years ago

@expat writer, then if what you say is so... Then i have to agree. I thought this issuing was related to the acquisition of the new planes.
Then, if what you say is right, things are turning more interesting.