Dubai plans comeback to international debt markets

DUBAI: Dubai has hired banks to advise it on its comeback to the international debt markets as the Middle East trade and tourism hub seeks to bolster finances hit by the coronavirus pandemic.

It is planning to issue US dollar-denominated 10-year Islamic bonds, or sukuk, and 30-year conventional bonds, a document issued by one of the banks leading the deal showed.

Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, HSBC, and Standard Chartered will arrange investor calls, which was scheduled to begin yesterday, ahead of the potential debt offering.

The planned deals will be of benchmark size, which generally means upwards of $500 million, as part of a $6 billion sukuk issuance programme and of a $5bn bond issuance programme, the document showed.

A banking source estimated the issuance could be around $2bn.

The new deal – which would be the emirate’s first public debt issuance since 2014 – comes amid a sharp economic downturn for the emirate, which has revived concerns over its financial soundness and brought back memories of the 2009 debt crisis.

Back then, the global credit crisis caused Dubai’s real estate market to crash, threatening to force some state-linked companies to default on billions of dollars of debt.

Zeina Rizk, executive fixed income director at Arqaam Capital, said the planned deal would likely attract hefty demand for the sukuk tranche, due to unsatisfied demand from domestic Islamic accounts, while appetite for the longer, 30-year conventional bonds – more targeted towards international investors – is likely to be “more price-sensitive.”

Details of the issuance emerged as aides to US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu flew to Abu Dhabi to put the final touches to a pact establishing open relations between the UAE and Israel.

According to a bond prospectus dated July 29 and seen by Reuters yesterday, Dubai renewed for five years in 2018 and 2019 $20bn of debt provided by Abu Dhabi and the UAE central bank in the aftermath of the 2009 crisis.

As of the end of June this year, the Dubai government had nearly $34bn in total direct debt, the prospectus said, adding that there was no consolidated estimates for the total debt outstanding of its government related entities (GREs).

“As such, the overall financial position and potential future financing requirements of Dubai’s GREs may not yet have been fully identified,” it said.

London-based Capital Economics, a research firm, estimates Dubai’s government and GREs have a total of about $15.9bn in debt maturing by the end of next year, of which $13.7bn is due from GREs. Dubai’s economy may contract by around 12 per cent this year, it said.

As the coronavirus pandemic hit vital economic sectors of the emirate, Dubai this year has raised over $3.6bn in debt through several instruments, the prospectus showed.

This included a 7.7bn dirhams ($2.10bn) Islamic facility, a $275m seven-year bilateral loan, a 1bn dirhams eight-year loan, and two fixed income instruments worth 1bn dirhams and $700m.




Share this page Share on FacebookShare on TwitterShare on Linkedin

Listen to 'Radio FCCIB' Videos & Podcast

Radio FCCIB is the new program launched by the French Chamber of Commerce & Industry in Bahrain, asking 3 questions to its members