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28 March 2024

Dubai bond attracts Dh23bn

Oversubscribed more than three times. Dollar portion offers 6.39%, dirham pays 5.65% n Indicates a new chapter of growth. (SUPPLIED)

Published
By Wam

The Government of Dubai has successfully priced the issue of $1.25 billion dollar-denominated sukuk at 6.39 per cent and the dirham-denominated portion of Dh2.5bn sukuk at 5.65 per cent.

Dubai's Department of Finance last night released the details of the five-year trust certificates under its $2.5bn Trust Certificate Issuance Programme. This transaction is the inaugural sukuk issuance by Dubai and is the first benchmark capital markets issuance by the Dubai Government since April 2008.

The transaction was launched following investor meetings in Hong Kong, Singapore, Dubai and London. The dual-tranche sukuk transaction was extremely well received globally and generated a large order book with more than 300 investors placing orders in excess of $6.3bn (Dh23.12bn).

Abdulrahman Al Saleh, Director-General, Department of Finance, said: "The market reaction to the Dubai offering has been extremely positive and is a powerful indication of the strength of investor confidence in the economic future of the UAE and Dubai. The funds will be invested in Dubai Government infrastructure and other strategic projects that will support the future economic success of the nation in accordance with the vision of our leadership.

"His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, stated confidently some weeks ago that the downturn is well and truly behind us. This transaction is evidence that we are preparing to begin a new chapter of growth," Al Saleh said.

Dubai Islamic Bank, Mitsubishi UFJ Securities International, Standard Chartered Bank and UBS Investment Bank were mandated as joint lead managers/bookrunners for the $1.25bn Trust Certificates and were joined by joint lead managers Emirates NBD and co-managers Bahrain Islamic Bank.

Dubai Islamic Bank, Mitsubishi UFJ Securities International, National Bank of Abu Dhabi, Standard Chartered Bank, and UBS Investment Bank were mandated as joint lead managers/bookrunners for the Dh2.5bn Trust Certificates and were joined by joint lead managers Emirates NBD and co-managers Al Hilal Bank.


Risk perception improves

The oversubscription shows a positive turnaround of the perception of Dubai's creditworthiness in the still-tight global financial markets.

It is an indication that spreads will fall further and that the emirate is confident of raising further tranches at lower rates, taking advantage of the improving risk perception.

Dubai is witnessing a healthy appetite from investors both at home and abroad. A clear indicator of this is the credit default swap rate for the five-year Dubai debt, which currently stands at around 290 basis points, and has declined by more than 70 per cent since the first quarter this year, when it was close to 1,000 bps.


Premium

The huge over-subscription in the issue has triggered a premium of up to 50 cents for the dollar sukuk.

There have been active enquiries for the dollar paper once the issue was closed. Sources said the premium could go up further once the allotment is announced.

 

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