| DUBAI, April 23
DUBAI, April 23 Dubai's government hopes its
first 15-year sukuk issue - an unusually long tenor for an
Islamic bond - will pave the way for long-term debt sales by its
state companies, the Department of Finance said on Wednesday.
Dubai drew $2.3 billion of investor demand for the $750
million issue on Tuesday, pricing it at 5.0 percent, the tight
end of initial guidance.
Demand was lower than in Dubai's last international debt
offer in January 2013, which raised $1.25 billion with a
two-tranche sale, a 10-year sukuk and a 30-year conventional
note. Order books then were some 12 times oversubscribed.
The difference was at least partly due to the sudden nature
of this year's issue, which took advantage of a window that
opened in the markets.
"The planning of the issue was completed in a short time in
order to benefit from favourable conditions on the global
financial markets," the department said in a statement on its
Sukuk issues generally tend to have maturities no longer
than five or seven years, so the 15-year maturity was striking,
suggesting Dubai saw benefits in building a longer-term yield
The issue "would reshape the government's yield curve and
facilitate future long-term issues of the Dubai government
companies," the department said.
Some Dubai state-linked firms were forced to restructure
billions of dollars of debt after the emirate's financial crisis
in 2009. Although Dubai is now recovering strongly, it faces the
challenge of repaying this debt and raising tens of billions of
dollars in coming years to fund ambitious construction projects,
including preparations to host the World Expo in 2020.
Abdulrahman al-Saleh, director-general of the department,
noted on Wednesday that the sukuk issue also tied in with
Dubai's efforts to become a global centre for Islamic finance
Some 61 percent of investors in the sukuk, which has a
common sale and lease-back structure known as ijara, came from
the Middle East, 17 percent from Britain and 10 percent from the
rest of Europe, the department said.
The sukuk easily covers Dubai's officially projected budget
deficit this year of 882 million dirhams ($240 million), or 0.26
percent of gross domestic product. The emirate plans to boost
its state spending 11 percent this year to the highest since
2008 as it launches new infrastructure projects.
However, Dubai and its stake-linked firms face major debt
maturities this year; sukuk issued by the department worth the
equivalent of $1.93 billion will mature in early November.
Banks arranging this week's sukuk were Dubai Islamic Bank
, Emirates NBD, HSBC, National Bank
of Abu Dhabi and Standard Chartered.
(Editing by Andrew Torchia)