Dubai opened its books to prospective international investors yesterday to regain their trust almost a year after the Dubai World crisis. The emirate's Government revealed that it had cut spending by 14 per cent to reduce the budget deficit, and continued to invest heavily in infrastructure. It is returning to the international capital markets with a programme of up to $4 billion (Dh14.6bn) in new borrowing.
"Analysts will look to it as Dubai turning the corner," said Mark Watts, head of fixed income at the National Bank of Abu Dhabi. "There's a number of things now you can see in the market that point to a positive movement and the bond adds to it. There are still problems but there's a feeling that this is a positive step." Sales in the property sector rose to 1,188 transactions in the first half of this year, more than double those in the second half of last year, the prospectus said.
In a sign that Dubai was taking more control over distressed properties, it said the Real Estate Regulatory Agency was overseeing the cancellation of nearly 500 developments. Dubai also said it had restructured payments with the contractors working on the Dubai Metro so that it could pay off its debts over several years in monthly instalments. The Government said its direct debt was Dh105.47bn, excluding government-related conglomerates such as Dubai World and Dubai Holding.
The planned bond issue will be a litmus test for the region's debt markets, which have been almost at a standstill since Dubai World announced last year that it would seek to delay payments on billions of dollars of debt. The restructuring of Dubai World took a leap forward last month after 99 per cent of the lenders agreed to new terms. Stock markets have risen sharply and the price of insuring against default has dropped.
Suketu Sanghvi, the senior director of structuring and investments at Essdar Capital, said the debt move would probably result in a quicker economic recovery. "It is going to be a very interesting transaction," he said. "We are quite hopeful and positive that the pricing should be in favour of Dubai and achieve the volumes they want. This is important for the whole economy." Rick Crossman, UAE head of personal finance at HSBC Middle East, said the move could kick-start retail banks' bond sales. "Customers are looking for capital-protected offerings and are willing to trade some return for that," he said. "Fixed-income investment and retail bonds might provide that kind of product."