Dubai’s $1-billion-plus bond pricing not yet finalised

Dubai said on Monday it would sell $1 billion in a dual-tranche Eurobond soon in its first debt sale since last year's crisis.

Speculation has already started over the pricing of the tranches.

However, a government spokesperson told Emirates 24|7 that the pricing of the proposed 5- and 10-year tranches were not yet finalised.

They are expected to be priced on Wednesday.

Reuters reported that early pricing talk was for a 5-year tranche with an initial yield guidance in the 6.75 per cent area. Initial guidance on the 10-year tranche is around 7.875 per cent, it said quoting a source at one of the lead managers on Tuesday.

The bond is likely to total at least $750 million for the five-year tranche and up to $500 million for the 10-year, a banking source told the wire.

Dubai has been gauging investor interest in a potential issue over recent months.

The fixed-coupon bond will be issued under its $4 billion EMTN programme and the proceeds would be used for general budgetary purposes, the Dubai government said in a statement.

HSBC, Deutsche Bank and Standard Chartered will handle the placement.

The emirate is also expected to cut budgetary costs by around 14 per cent this year.

The emirate's most recent sovereign bond sale was launched last October, barely a month before its flagship conglomerate Dubai World announced debt moratorium.

In August, a Dubai official said the 2010 budget gap would come lower than the Dh6 billion ($1.63 billion) planned.

The deficit widened to Dh12.9 billion last year, the biggest gap since at least 2005 and above Dh4.2 billion, the prospectus for the new issue obtained by Reuters showed.

Dubai's state firms are sitting on more than $100 billion in debt in total. The government's indebtedness stood at $28.9 billion in July, the prospectus showed.

Among pressing upcoming obligations is a $555 million loan at Dubai Holding's loss-making main unit DHCOG, which was due to mature in July but has been extended until November 30.

Some $2.7 billion has yet to be drawn down from the Dubai Financial Support Fund, the bond prospectus showed.

State-owned utility Dewa attracted $11.5 billion in bids for a $1 billion bond in April but had to pay a generous 1.25 percent premium to the underlying sovereign.

The yield on Dubai's paper maturing in 2014 has come down to 6.39 per cent from a high of 10 per cent in February.

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