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Dubai government likely to issue new Sukuk, mandates four banks

Published: 20/02/2013 11:58:00 AM GMT
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Dubai: Dubai is eyeing at issuance of new sukuk as four banks have been mandated by the Government of Dubai for a potential Sukuk issue. This was revealed by the four sources familiar with the matter on Monday, as the United Arab Emirates seeks to benefit from its lowest borrowing costs since a crippling debt crisis in 2009.

By Farhan Iqbal


Dubai: Dubai is eyeing at issuance of new sukuk as four banks have been mandated by the Government of Dubai for a potential Sukuk issue. This was revealed by the four sources familiar with the matter on Monday, as the United Arab Emirates seeks to benefit from its lowest borrowing costs since a crippling debt crisis in 2009.

Three of the sources indicated the new issue could be announced very soon and two sources said that the borrower is looking to raise at least $1 billion from the sale. All sources requested for anonymity because the information is not yet public.

A Dubai government spokesperson was not available for comment.

It has picked Dubai Islamic Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered PLC to arrange the potential new sale, the sources said.

Unrated Dubai’s five-year credit default swaps, or the cost to insure against sovereign default, were trading at 211 basis points on Monday, at their lowest since hitting levels above 600 bps at the peak of its debt crisis in late 2009.

Since then, the UAE has been at pains to regain its credibility among international investors, successfully refinancing or restructuring debt maturities as well as benefiting from safe haven status amid broader regional unrest.

“It makes sense for them to come now as the spreads are ridiculously low,” said a banker away from the deal.

Yields on Dubai’s existing bonds have continued to drop this year, after a dramatic rally in 2012. Its $750 million 7.75 percent bond, which matures in 2020, was bid at 128 cents on the dollar on Monday, to yield just 3.5 percent, about 30 bps tighter since the start of the year.

Dubai last tapped global debt markets in April with a $1.25 billion two-tranche sukuk, which was substantially oversubscribed.

It is understood that the government will issue ahead of state-owned utility Dubai Electricity and Water Authority (DEWA) which has also indicated its intention to raise about $1 billion in a sukuk sale in the first quarter.



Branch of Dubai Islamic Bank in Dubai, UAE

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