| DUBAI, April 26
DUBAI, April 26 Proceeds from Dubai's new $1.25
billion, two-tranche Islamic bond provide enough funds for the
Gulf Arab emirate to manage its budget deficits and refinancing
plans, a senior government official said on Thursday.
Dubai priced on Wednesday a $600 million 5-year tranche at
4.9 percent and a $650 million 10-year tranche at 6.45 percent
and the department of finance said the issues drew orders of
more than $4.5 billion.
"This sukuk issuance provides us enough liquidity to manage
our budget deficits and refinancing plans proactively,"
Abdulrahman al-Saleh, Director General at Dubai's Department of
Finance said in a statement.
"We continue to examine ways to optimize our funding
strategy by diversifying our funding options and extending
maturities," he said.
Saleh noted Dubai had been able to reduce its cost of
funding on the sukuk, compared to previous debt issuance of
The emirate is still restructuring some debt at state-linked
firms, including two significant maturities in 2012 from Jebel
Ali Free Zone (JAFZA) and DIFC Investments, which have to repay
a combined $3.25 billion this year.
Its biggest restructuring - a $26 billion debt deal at
flagship conglomerate Dubai World which rattled
global markets in November 2009 - was signed in 2010.
Dubai, one of seven members of the United Arab Emirates
federation, has been recovering from the depths of its
2009-2010 debt crisis helped by strong trade flows with Asia,
tourism and its safe-haven status amid a wave of social unrest
in the Middle East and North Africa last year.
"Investors were happy with the steps taken by the government
over the last three years to counter the impact of financial
crisis and prudent measures to control costs and manage its
budget deficit," Saleh said.
The emirate's budget deficit narrowed sharply to 3.7 billion
dirhams ($1 billion) last year, helped by higher oil income and
lower spending on development projects, a prospectus for the
latest sovereign bond showed this week.
That represents 1.2 percent of 2010 gross domestic product,
according to Reuters calculations. GDP data for 2011 has yet to
be released. A shortfall of 1.8 billion dirhams is planned for
2012, the prospectus reiterated.
Dubai's direct government debt stood at 113.6 billion
dirhams ($30.9 billion) at the end of March, the prospectus also
showed. However, analysts polled by Reuters in March put the
emirate's overall debt including government-owned firms at an
estimated $118 billion, or 144 percent of GDP.
The Gulf trade and business hub, which accounts for nearly a
third of the UAE's GDP, is aiming for economic growth of 4.5
percent this year, up from an estimated expansion of more than 3
percent in 2011, Dubai's top official said in February.
But worsening of global financial conditions could make it
more difficult to roll over some of the maturing debt of UAE
government-linked entities, the International Monetary Fund said
in March, with about $32 billion of sovereign and
government-linked debt estimated to mature in 2012, of which $15
billion in Dubai.