Dubai Plans Bond Sales to Bolster Finances

William Arsn

(Bloomberg) — Dubai hired banks for an offering of bonds and Islamic securities in dollars, joining Gulf Arab neighbors that have issued foreign debt to shore up their finances.


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The government of the Middle East’s main business hub is selling a benchmark-size 10-year sukuk and a 30-year bond, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified. Benchmark typically means at least $500 million equivalent.

Dubai is following other governments from the region that have sold dollar debt or started the process as they take advantage of low borrowing costs, with Federal Reserve Chairman Jerome Powell signaling last week that U.S. interest rates will stay low for longer. Staring down about $14 trillion of negative-yielding debt worldwide, investors are also seeking higher returns.

“As long as issuers are not too greedy on pricing, demand is robust,” said Carl Wong, head of fixed income at Avenue Asset Management Ltd. in Hong Kong. “Sentiment is very strong for emerging-market assets.”

Economy Buckles

Abu Dhabi, the capital of the United Arab Emirates, raised $5 billion in a three-part offering last week. Bahrain is also planning a return to the dollar debt market, according to people familiar with the matter.

Built on trade and tourism in a region reliant on oil, Dubai’s economy has buckled under the coronavirus pandemic and low oil prices. Its government debt isn’t rated, but credit assessors have recently turned skeptical over key local companies, such as utility Dewa and port operator DP World, which suffered downgrades this year.

The pandemic also forced Dubai, home to the world’s tallest building, to delay this year’s World Expo, seen as key to boosting an economy that was already growing slowly.

The government revised its budget deficit for 2020 to 11.9 billion dirhams ($3.2 billion), from an earlier estimate of 2.5 billion dirhams, according to its bond-sale prospectus. The budget gaps of the six members of the Gulf Cooperation Council will probably amount to $75 billion to $80 billion in total, said Anita Yadav, chief executive officer of Global Credit Advisory in Dubai.

a screenshot of a cell phone: Tough Year

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Tough Year

Dubai hired Dubai Islamic Bank to manage the sukuk sale, along with Emirates NBD Capital, First Abu Dhabi Bank PJSC, HSBC Holdings Plc and Standard Chartered Plc as joint lead managers. They are arranging investor calls across Asia, the Middle East and Europe starting Monday.

(Updates with comment by Avenue Asset in fourth paragraph, budget deficit estimate by Global Credit Advisory in eighth.)

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