Dubai to issue bond

Al Saleh says there’s no pressure to issue bonds for emergency situations

Dubai plans to issue a bond to refinance part of Dh6.5 billion ($1.8 billion) of sovereign debt maturing in April 2013, its finance chief said on Monday.

Abdulrahman Al Saleh, Director-General of the Dubai Department of Finance, did not discuss the size or timing of any new bond or give other details, and government officials were not available to confirm his comments.

Saleh told Dubai TV in an interview: "In the past, we issued bonds to support the government's financial strategy and finance infrastructure projects.

"In the coming period, we also have plans that need financial support in the airline industry, we have expansion plans for Dubai Airport and Al Maktoum (airport), and there is a need to refinance debt when it matures."

Saleh also told Dubai TV: "I confirm that we are under no pressure to issue bonds for emergency situations."

Unrated Dubai last sold sovereign debt in April this year - a $1.25 billion, two-tranche Islamic bond aimed at covering its budget deficit and refinancing debt.

Dubai's budget deficit narrowed sharply to Dh3.7 billion last year, helped by higher oil revenue and lower spending on development projects, a sovereign bond prospectus produced by the emirate in April showed.

Gulf bonds have rallied strongly in the secondary market this year because of downward pressure on global interest rates; Dubai names have led the rally as the emirate has made progress in resolving its corporate debt problems.

This has raised expectations that regional borrowers could take advantage of the favourable conditions by issuing debt in the near future.

Dubai's credit default swaps, which represent the cost of insuring against default, stood at 278 basis points on Monday, their lowest level since September 2008, Markit data showed. They tightened more than 15bps on Wednesday, after the credit rating of state utility Dubai Electricity and Water Authority (Dewa) was raised to investment grade by Moody's.

The trade-driven economy of Dubai is showing positive signs based on growth rates in various sectors during the first half of 2012.

The UAE Central Bank said this month that Dubai might achieve gross domestic product growth of 4 per cent or more this year.

"The GDP growth is expected to reach 4 per cent this year and next year, we expect it to be more than 4 per cent," Saleh told Dubai TV.

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